Deck 9: The Master Budget

Question 1

A budget is a quantitative expression of a plan that helps managers coordinate and implement the plan.

Answer 1

True

Question 2

Budgets communicate financial plans to employees at all levels in the company.

Answer 2

True

Question 3

The master budget includes both the operating budgets and the financial budgets.

Answer 3

True

Question 4

Managers may intentionally build slack into the budget

A)to gain the resources they need in the event of budget cuts.
B)to make their performance look worse.
C)because they are certain about the future.
D)to accomplish all of the above.

Question 5

Budgets are helpful because managers can plan the cash inflows and outflows in an organization.

Question 6

Budget committees include all of the following people except

A)CEO.
B)Research and development manager.
C)Shareholder.
D)Marketing manager.

Question 7

Management uses budgets to express its plans and to assess how well the organization meets or exceeds its goals.

Question 8

Budgets are used to accomplish all of the following tasks, except

A)planning for the future.
B)controlling operations.
C)recording actual results.
D)directing operations.

Question 9

Strategic planning enables the organization to establish long-term goals that extend 5-10 years into the future.

Question 10

Which of the following is a potential disadvantage of participative budgeting?

A)Managers are more likely to be motivated by budgets they help create.
B)Managers may build slack into the budget.
C)Managers should acquire knowledge to create realistic budgets.
D)None of the above are true.

Question 11

Budgets do not provide benchmarks to help managers evaluate performance.

Question 12

Strategic planning is beneficial because the organization can

A)establish long-term goals that extend 5-10 years into the future.
B)establish short-term goals that extend one year into the future.
C)establish goals for next month.
D)execute directives from the board of directors.

Question 13

One of the key benefits of budgeting is that it forces managers to plan.

Question 14

The master budget is the set of budgeted financial statements and supporting schedules in the entire organization.

Question 15

The capital expenditures budget is not a component of the operating budget.

Question 16

The financial budget projects the collection and payment, of cash, and the forecast of the company's budgeted balance sheet.

Question 17

Most companies use ________ when the lower level management develops budgets each year.

A)a top-down approach
B)zero-based budgets
C)slack-based budgets
D)participative budgeting

Question 18

A rolling budget is useful because the organization can continue to budget its operations 12 months into the future.

Question 19

Strategic planning involves setting short-term goals that extend three to four months into the future.

Question 20

A rolling budget is a budget that

A)extends 5-10 years into the future.
B)is continuously updated, so that the next 12 months of operations are always budgeted.
C)begins with zero for each expense, and then amounts are added in.
D)is executed by upper management.

Question 21

Which of the following statements about budgeting is not true?

A)Budgeting is an aid to planning and control.
B)The operating budget should be prepared by top management, rather than mid-management personnel, because they have the overall objectives of the company in mind.
C)Budgets help to coordinate the activities of the entire organization.
D)Budgets promote communication and coordination between departments in an organization.

Question 22

All of the following are functions of the budget committee except

A)review the budgets it submits for approval in an organization.
B)determine the bonuses the organization awards to employees that achieve the target budget.
C)approve the final budget it expects the organization to implement.
D)remove unwarranted slack in the workplace.

Question 23

The ________ budget is a component in a financial budget.

A)cash
B)sales
C)direct materials
D)operating expense

Question 24

Managers may intentionally build slack into the budget

A)because they are uncertain about the future.
B)to make their performance appear better.
C)to acquire the resources they need in the event the organization implements a budget cut.
D)because all of the above are true.

Question 25

Which of the following is NOT a benefit of budgeting?

A)Budgeting forces managers to consider relations across the value chain.
B)Budgeting provides a benchmark that motivates employees.
C)Budgeting forces managers to work in a silo, promoting only the goals of their department.
D)Budgeting provides a benchmark to help managers evaluate performance.

Question 26

Which of the following is an advantage of zero-based budgeting?

A)Zero-based budgeting is time consuming.
B)Zero-based budgeting forces managers to justify each dollar in the budget to ensure that some expenses are lower in a current year compared to what they were in previous years.
C)Zero-based budgeting is labor intensive.
D)All of the above are advantages.

Question 27

The ________ budget is a component in a financial budget.

A)production
B)budgeted income statement
C)budgeted balance sheet
D)sales

Question 28

The ________ budget is a component in a financial budget.

A)direct labor
B)capital expenditures
C)budgeted income statement
D)manufacturing overhead

Question 29

Which of the following is a benefit to an organization that implements a budget?

A)Budgets help managers focus their attention on the future needs in an organization.
B)Budgets help managers improve their decision-making processes in an organization.
C)Budgets help the manager improve the motivation of employees in the workplace.
D)All of the above

Question 30

What is the starting point of the master budget process?

A)sales budget
B)cash budget
C)budgeted income statement
D)production budget

Question 31

Which of the following is an advantage of the budgeting process?

A)Coordinates the activities of the organization
B)Assures that the lowest cost materials will be obtained
C)Assures the company will achieve its objectives
D)Guarantees that a profit will be achieved

Question 32

Which of the following should the organization use to initiate a budget?

A)Last year's budget
B)Last year's actual amounts
C)Zero-based budgeting
D)Any of the above

Question 33

"The comprehensive budget" is best described by which of the following terms?

A)Operating budget
B)Sensitivity analysis
C)Responsibility center
D)Master budget

Question 34

The budget committee

A)rarely has the final say on the budget.
B)usually is made up of the accounting staff.
C)usually is made up of managers from all areas of the value chain.
D)usually is made up of the Board of Directors.

Question 35

Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. Production budget
2) Sales budget
3) Direct materials budget

A)2, 3, 1
B)1, 3, 2
C)3, 1, 2
D)2, 1, 3

Question 36

Which of the following alternatives reflect the proper order of preparing components of the master budget? 1. Financial budget
2) Operating budget
3) Capital expenditures budget

A)1, 3, 2
B)2, 3, 1
C)1, 2, 3
D)3, 1, 2

Question 37

Which of the following budgets is a major part of the master budget and it focuses on the income statement and its supporting schedules?

A)cash
B)operating
C)capital expenditures
D)financial

Question 38

Which of the following terms is useful because it compares "actual" revenues and expenses against "budgeted" revenues and expenses?

A)Responsibility center
B)Capital budget
C)Performance report
D)Sensitivity analysis

Question 39

Which of the following budgets is the cornerstone of the master budget?

A)sales
B)cash
C)budgeted balance sheet
D)operating expense

Question 40

The ________ budget is a component in an operating budget.

A)capital expenditure
B)budgeted balance sheet
C)production
D)cash

Question 41

On the direct labor budget, the total quantity of direct labor hours needed is computed as

A)units to be produced × direct labor hour per unit.
B)quantity needed for production + indirect labor hours - direct labor hours.
C)units to be produced - indirect labor hours × cost per labor hour.
D)estimated direct labor hours needed × cost per hour.

Question 42

The ________ budget is the only budget stated only in units, not dollars.

A)production
B)sales
C)direct materials
D)manufacturing overhead

Question 43

When creating the sales budget, management simply takes the sales from the year before and divides that total by 12 months. Thus, each month will always predict the same amount of budgeted sales.

Question 44

In preparing the operating budget, the first step is preparing the

A)cash budget.
B)sales budget.
C)budgeted income statement.
D)purchases budget.

Question 45

Which of the following budgets usually shows separate sections for fixed and variable costs?

A)Direct materials and manufacturing overhead budget
B)Manufacturing overhead budget and production budget
C)Production budget and manufacturing overhead budget
D)Operating expenses budget and manufacturing overhead budget

Question 46

On the direct materials budget, the total quantity of direct materials to purchase is computed as

A)quantity needed for production + desired end inventory of DM - beginning inventory of DM.
B)units to be produced + desired end inventory of DM - beginning inventory of DM.
C)units to be produced - desired end inventory of DM + beginning inventory of DM.
D)quantity needed for production - desired end inventory of DM + beginning inventory DM.

Question 47

The ________ budget begins with the number of units to be sold.

A)manufacturing overhead
B)direct materials
C)sales
D)capital expenditures

Question 48

The four components of the operating budget are the sales budget; inventory, purchases and cost of goods sold budget; and the cash budget.

Question 49

Which of the following is not part of the operating budget?

A)Direct materials budget
B)Cash budget
C)Sales budget
D)Budgeted income statement

Question 50

Which of the following is not included in the operating budget?

A)Budgeted income statement
B)Sales budget
C)Direct labor budget
D)Budgeted balance sheet

Question 51

Loyal Pet Company expects to sell 6000 beefy dog treats in January and 10,000 in February for $2 each. What will be the total sales revenue reflected in the sales budget for those months?

A)January $12,000; February $20,000
B)January $3000; February $5000
C)January $5000; February $3000
D)January $20,000; February $12,000

Question 52

The ________ budget starts with the number of units to be produced.

A)direct materials
B)manufacturing overhead
C)direct labor
D)All of these choices start with the number of units to be produced.

Question 53

Which of the following budgets or financial statements is part of the operating budget?

A)Sales budget
B)Budgeted balance sheet
C)Capital expenditures budget
D)Cash budget

Question 54

Budgeting includes planning for ending inventory.

Question 55

The ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process.

A)cash budget
B)budgeted statement of cash flows
C)budgeted income statement
D)sales budget

Question 56

The first component of the operating budget is the production budget.

Question 57

The sales budget must be prepared after every other component of the operating budget.

Question 58

The sales budget is the cornerstone of the master budget.

Question 59

List and describe three reasons why a company and its managers could benefit from the use of budgeting.

Question 60

On the production budget, the number of units to be produced is computed as

A)unit sales + desired end inventory + beginning inventory.
B)unit sales + desired end inventory - beginning inventory.
C)unit sales - desired end inventory - beginning inventory.
D)unit sales - desired end inventory + beginning inventory.

Question 61

Victoria Corporation manufactures quality vases. Budgeted sales and production data for the vases are as follows: Each vase requires one pound of clay in its manufacture. Victoria Corporation has a policy that the inventory of clay at the end of each month needs to be equal to 10% of the production needs for the following month. At the beginning of January, 230 pounds of clay were in inventory. How many pounds of clay would Victoria Corporation need to purchase in February (Month 2)?

A)2430
B)2340
C)4130
D)2830

Question 62

Russell Company expects cash sales for July of $13,000, and a 24% monthly increase during August and September. Credit sales of $6000 in July should be followed by 14% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

A)$16,120 and $5160
B)$19,989 and $4438
C)$11,180 and $7440
D)$9615 and $9226

Question 63

Rubino Corporation desires a December 31 ending inventory of 1000 units. Budgeted sales for December are 3450 units. The November 30 inventory was 550 units. What are budgeted purchases in units?

A)4450
B)3000
C)3900
D)5000

Question 64

At the beginning of the year, Patio Living Corporation has 560 planters in inventory. The company plans to sell 5000 planters during the year and wants to have 1300 planters in inventory at the end of the year. How many planters must Patio Living Corporation produce during the year?

A)5740
B)6300
C)3140
D)6860

Question 65

Piatt Company expects cash sales for July of $16,000, and a 23% monthly increase during August and September. Credit sales of $1400 in July should be followed by 29% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A)$20,640 and $1722
B)$13,008 and $1085
C)$19,680 and $1806
D)$24,206 and $2330

Question 66

Kotrick Company has beginning inventory of 17,000 units and expected sales of 21,000 units. If the desired ending inventory is 20,000 units, how many units should be produced?

A)18,000
B)42,000
C)16,000
D)24,000

Question 67

Mockingbird Company expects to sell 4600 bird perches in January and 8000 in February for $2 each. What will be the total sales revenue reflected in the sales budget for those months?

A)January $2300; February $4000
B)January $9200; February $16,000
C)January $4000; February $2300
D)January $16,000; February $9200

Question 68

Daisy Company manufactures dog collars. The following selected data relates to Daisy Company's budgeted sales and inventory levels of the dog collars for the upcoming quarter: How many dog collars should Daisy Company produce in November?

A)700
B)3020
C)3900
D)2140

Question 69

Terrific Toys Company manufactures and sells children's skateboards. Each skateboard requires four bearings. For September, Terrific Toys Company has budgeted skateboard sales of 540 skateboards, while 600 skateboards are scheduled to be produced. Terrific Toys Company will begin September with 200 bearings in its beginning inventory, and estimates ending inventory for September to be 440 bearings. How many bearings should Terrific Toys Company purchase in September?

A)340
B)2400
C)2600
D)2640

Question 70

Crafty Carpentry Company produces and sells a shelf for $25 each. The beginning inventory is 1200 shelves, and the desired ending inventory is 1700 shelves. If budgeted production is 12,000 shelves, what is the forecasted sales revenue from the shelves?

A)$372,500
B)$287,500
C)$300,000
D)$227,500

Question 71

Bruner Stores wants to have 700 shovels in ending inventory on December 31. Budgeted sales for December are 1950 shovels. The November 30 inventory was 260 shovels. How many shovels should Benson Stores purchase for December?

A)2910
B)1510
C)2650
D)2390

Question 72

At the beginning of the year, Lakeview Corporation has 690 life vests in inventory. The company wants to have 2300 vests in inventory at the end of the year and plans to sell 6100 life vests during the year. How many life vests must Lakeview Corporation produce during the year?

A)8400
B)3110
C)7710
D)9090

Question 73

Jolly Company produces hula hoops. Jolly Company has the following sales projections for the upcoming year: Jolly Company wants to have 10% of the next quarter's sales in units on hand at the end of each quarter. Inventory at the beginning of the year was 3800 hula hoops. How many hula hoops should Jolly Company produce during the first quarter?

A)36,700
B)29,100
C)20,100
D)23,900

Question 74

CatNap Company has two products: Kittyz and Katz. A March sales forecast projects 15,000 units of Kittyz and 10,000 units of Katz are going to be sold at prices of $15 and $18, respectively. The desired ending inventory of Kittyz is 12% higher than the beginning inventory, which was 2000 units. How much are total March sales for Kittyz anticipated to be?

A)$125,000
B)$180,000
C)$225,000
D)$270,000

Question 75

McCoy Company wants to have an ending inventory of 8000 units. McCoy Company has beginning inventory of 14,000 units and expects to sell 34,000 units. How many units should McCoy Company produce?

A)28,000
B)40,000
C)56,000
D)42,000

Question 76

DogDayz Company has two products: Doggyz and Pupz. A March sales forecast projects 15,000 units of Doggyz and 20,000 units of Pupz are going to be sold at prices of $13.50 and $19.00, respectively. The desired ending inventory of Doggyz is 16% higher than the beginning inventory, which was 1000 units. How much are total March sales for Doggyz anticipated to be?

A)$380,000
B)$202,500
C)$285,000
D)$93,750

Question 77

Totz Company produces jump ropes. Totz Company has the following sales projections for the upcoming year: Inventory at the beginning of the year was 4500 jump ropes. Totz Company wants to have 20% of the next quarter's sales in units on hand at the end of each quarter. How many jump ropes should Totz Company produce during the first quarter?

A)12,500
B)17,000
C)16,500
D)25,500

Question 78

Dallas Corporation had beginning inventory of 18,700 units and expects sales of 80,000 units during the year. Desired ending inventory is 19,500 units. How many units should Dallas Corporation produce?

A)80,800 units
B)41,800 units
C)79,200 units
D)118,200 units

Question 79

Hewitt Company expects cash sales for July of $11,000, and a 19% monthly increase during August and September. Credit sales of $14,000 in July should be followed by 28% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A)$14,080 and $16,660
B)$9244 and $10,938
C)$15,577 and $22,938
D)$13,090 and $17,920

Question 80

Meers Corporation had beginning inventory of 17,000 units and expects sales of 79,000 units during the year. Desired ending inventory is 19,900 units. How many units should Meers Corporation produce?

A)76,100 units
B)42,100 units
C)81,900 units
D)115,900 units