Deck 8: Budgeting for Planning and Control

Question 1

The first section of the master budget is the financial budget.

Answer 1

False

Question 2

A flexible budget compares actual costs to budgeted costs.

Answer 2

True

Question 3

A static budget is one developed for a single level of activity.

Answer 3

True

Question 4

A budget is a financial plan for the future used for planning, controlling, and decision making.

Question 5

The budget director is responsible for directing and coordinating the budgeting process.

Question 6

The sales forecast is the basis for the sales budget.

Question 7

Activity-based budgeting recognizes interdependencies among departments.

Question 8

A continuous budget is a moving twelve-month budget.

Question 9

The cash budget is the least priority budget in the master budget.

Question 10

In a for-profit service firm, the sales budget is also the production budget.

Question 11

The capital expenditures budget is a long-term financial plan.

Question 12

The production budget describes how many units must be produced in order to meet sales and inventory needs.

Question 13

The cash excess or deficiency section of the cash budget compares expected available cash to the expected cash needed.

Question 14

The budgeted income statement depends partly on information in the budgets in the master budget.

Question 15

Once all the operating budgets have been completed, the net income can be estimated.

Question 16

The master budget is composed of the operations budget and the future budget.

Question 17

Budgeting means to set standards, receive feedback, and executing corrective action.

Question 18

Static budgets show costs for varying levels of activities.

Question 19

A flexible budget is sometimes referred to as a variable budget.

Question 20

The sales budget shows the expected sales quantity and price of each product or service.

Question 21

Participative budgeting detracts from a manager's sense of responsibility and creativity.

Question 22

Activity-based budgets also focus on __________ processes.

Question 23

The process of setting standards, receiving feedback, and taking corrective action whenever performance deviates from standards is called __________ .

Question 24

Incentives are the means used to encourage managers to achieve goals.

Question 25

Operating expense budgets include the marketing expense budget and the __________ expense budget.

Question 26

The comprehensive financial plans made up of departmental and activity budgets are the __________.

Question 27

A __________ budget is developed around one particular level of activity.

Question 28

The __________ budget shows the projected sales and prices.

Question 29

The __________ income statement is the culmination of the operating budget.

Question 30

When managers intentionally underestimate or overestimate revenues and costs it is called budgetary __________.

Question 31

The body responsible for reviewing the budget, providing policy guidelines and budgetary goals, resolving differences that may arise, and approving the final budget is the __________ committee.

Question 32

An ideal budgeting system is one that achieves goals and encourages managers to achieve goals ethically.

Question 33

Volume variances examine differences between the __________ budget and the __________ budget.

Question 34

The quantitative expressions of plans stated in either physical or financial terms are called __________ .

Question 35

The budgeted __________ shows projected assets, liabilities, and shareholders' equity of the end of the budget period.

Question 36

Cash disbursements and cash excess or deficiency are components of the __________ budget.

Question 37

The activity-based budget begins with output and then determines the resources necessary to create that output.

Question 38

The accounts receivable aging schedule aids in determining the timing of cash __________ .

Question 39

The budgeting that recognizes interdependencies among departments is called __________ budgeting.

Question 40

Feedback is not important to managers as a measuring tool of their performance.

Question 41

The budgeted income statement is a component of the:

A)cash budget.
B)overhead budget.
C)operating budget.
D)investing budget.

Question 42

Which of the following is NOT a responsibility of the budget committee?

A)prepare actual financial statements
B)provide policy guidelines
C)provide budgeting goals
D)resolve differences that may arise as the budget is prepared

Question 43

The budgets that are comprehensive financial plans made up of various individual departmental and activity budgets are the:

A)Operating budgets
B)Master budgets
C)Financial budgets
D)Continuous budgets

Question 44

Operating budgets are

A)a forecast of expected operating expenses.
B)a forecast of operating expenses and related revenues.
C)a forecast of units of production.
D)concerned with the income-generating activities of a firm.

Question 45

Which of the following is NOT a component of the master budget?

A)Sales Budget
B)Capital Budget
C)Cost of Goods Sold Budget
D)Budget to Actual Variance Analysis

Question 46

Which of the following factors is NOT an advantage of preparing operating budgets?

A)It provides resource information that can be used to improve decision making.
B)It improves communication and coordination.
C)It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance.
D)It saves time and resources.

Question 47

Which of the following ensures that the budget is linked to the strategic plan of the organization?

A)The budget council
B)The budget committee
C)The budget operator
D)The budget auditor

Question 48

Which of the following is true of a budget committee?

A)It takes care of the marketing activities of a firm.
B)It ensures that shareholders approve the budget.
C)It works under the direction of the budget director.
D)It is responsible for reviewing the budget.

Question 49

The following is responsible for directing and coordinating the overall budgeting process:

A)budget committee
B)budget director
C)president
D)treasurer

Question 50

Control can be defined as

A)the process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from plan.
B)a quantification of plans, stated in either physical or financial terms, or both.
C)identification of corporate objectives.
D)a comprehensive financial plan.

Question 51

Zeal Company produces and sells bikes. It expects to sell 15,000 bikes in June for the current year and had 1,000 bikes in finished goods inventory at the end of May. Zeal Company would like to complete operations in June with at least 1,700 completed bikes in inventory. The bikes sell for $250 each. What would be the total sales for June?

A)$4,150,000
B)$1,250,000
C)$3,750,000
D)$2,640,000

Question 52

The budgets that are concerned with the inflows and outflows of cash and with financial position are called the:

A)Operating budgets
B)Master budgets
C)Financial budgets
D)Continuous budgets

Question 53

The budgets that are concerned with the income-generating activities of a firm are called the:

A)Operating budgets
B)Master budgets
C)Financial budgets
D)Continuous budgets

Question 54

Which of the following statement is correct regarding a continuous budget?

A)The budget is prepared for a one-year period that corresponds to the company's fiscal year.
B)A continuous budget is a monthly budget.
C)As a month/period expires in the budget, an additional month/period in the future is added so the company always has a 12-month budget on hand.
D)None of these

Question 55

Which of the following is the basis for all operating budgets and most financial budgets?

A)A delivery forecast
B)A sales forecast
C)A technical forecast
D)A labor forecast

Question 56

The process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance.

A)Control
B)Monitoring
C)Eye balling
D)Comparing

Question 57

The type of budget that is a moving twelve-month budget is called the:

A)zero-based budget
B)flexible budget
C)continuous budget
D)both a and b

Question 58

Which of the following is NOT an advantage of budgeting?

A)It forces managers to plan.
B)It provides resource information that can be used to improve decision making.
C)It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance.
D)It provides organizational independence.

Question 59

41. Which of the following refers to quantitative plans for the future, stated in either physical terms or financial terms or both?

A)A statement of owner's equity
B)An income statement
C)A budget
D)A balance sheet

Question 60

Wheeling Company produces and sells bikes. It expects to sell 20,000 bikes in the month of April and had 1,200 bikes in finished goods inventory at the end of March. Wheeling Company would like to complete operations in the month of April with at least 1,500 completed bikes in inventory. The bikes sell for $100 each. How many bikes would be produced in the month of April?

A)20,000 bikes
B)20,300 bikes
C)19,700 bikes
D)18,800 bikes

Question 61

The following forecasted sales pertain to Alicia Company: $$\begin{array} { l r } \text { Month } & \text { Sales } \\\text { April } & \$ 200,000 \\\text { May } & 250,000 \\\text { June } & 150,000 \\\text { July } & 100,000\end{array}$$ Finished goods inventory as of March 31 4,000 units
The company has a selling price of $20 per unit and expects to maintain ending inventories equal to 20 percent of the next month's sales.
How many units are expected to be produced in April?

A)8,500 units
B)12,500 units
C)14,500 units
D)10,500 units

Question 62

Foremost Corporation manufactures boxes. The estimated number of boxes sold for the first three months of the current year are: $$\begin{array} { l l } \text { Month } & \text { Sales } \\\text { January } & 3,000 \\\text { February } & 4,200 \\\text { March } & 3,900\end{array}$$ Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Corporation expects to sell the boxes for $5 each. April sales is projected at 4,500 boxes.
How many boxes should be produced in February?

A)4,140 boxes
B)4,200 boxes
C)4,260 boxes
D)3,900 boxes

Question 63

Alana Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months.
Based on this information, the number of units of A1 that needs to be purchased by Alana during the first month is

A)9,500 units.
B)10,000 units.
C)1,000 units.
D)10,500 units.

Question 64

Roaming Vehicles Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
How many units of wood are expected to be used in production during the second month?

A)12,500 units
B)10,000 units
C)15,000 units
D)12,000 units

Question 65

Bronze Company's sales forecast for April is 12,000 units, for May is 22,000 units, and for June is 25,000 units. Sales totaled 10,000 units in March. The finished goods inventory for March was 2,000 units. End-of-month finished goods inventory levels are planned to be equal to 15 percent of the next month's planned sales. The planned ending inventory of finished goods for May is:

A)3,750 units.
B)2,470 units.
C)5,640 units.
D)6,320 units.

Question 66

Foremost Corporation manufactures boxes. The estimated number of boxes sold for the first three months of the current year are: $$\begin{array} { l l } \text { Month } & \text { Sales } \\\text { January } & 3,000 \\\text { February } & 4,200 \\\text { March } & 3,900\end{array}$$ Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Corporation expects to sell the boxes for $5 each. April sales is projected at 4,500 boxes.
How many boxes should be produced in January?

A)3,060 boxes
B)2,940 boxes
C)3,000 boxes
D)3,840 boxes

Question 67

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r } \text { Month } & \text { Sales } \\\text { October } & 10,000 \\\text { November } & 14,000 \\\text { December } & 13,000\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps. In going from the sales budget to the production budget, adjustments to the sales budget need to be made for

A)finished goods inventories.
B)cash receipts.
C)factory overhead costs.
D)selling expenses.

Question 68

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r } \text { Month } & \text { Sales } \\\text { October } & 10,000 \\\text { November } & 14,000 \\\text { December } & 13,000\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps.
How many lamps should be produced in November?

A)11,000 lamps
B)10,500 lamps
C)14,000 lamps
D)13,750 lamps

Question 69

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r } \text { Month } & \text { Sales } \\\text { October } & 10,000 \\\text { November } & 14,000 \\\text { December } & 13,000\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps.
How many lamps should be produced in October?

A)10,000 lamps
B)14,000 lamps
C)9,500 lamps
D)10,500 lamps

Question 70

Roaming Vehicles Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
What is the number of units of wood that need to be purchased by Roaming Vehicles Company during the first month?

A)1,000 units
B)9,500 units
C)500 units
D)10,000 units

Question 71

Armando Company produces and sells mattresses. It expects to sell 10,000 mattresses in the current year and had 1,000 mattresses in finished goods inventory at the end of the previous year. Armando would like to complete operations in the current year with at least 1,250 completed mattresses in inventory. There is no ending work-in-process inventory. The mattresses sell for $300 each. What would be the total sales for the current year?

A)$3,375,000
B)$3,675,000
C)$3,000,000
D)$3,300,000

Question 72

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r } \text { Month } & \text { Sales } \\\text { October } & 10,000 \\\text { November } & 14,000 \\\text { December } & 13,000\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps.
What is the expected sales revenue for December?

A)$250,000
B)$350,000
C)$325,000
D)$100,000

Question 73

Roaming Vehicles Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
How many units of steel are expected in the material inventory at the end of the second month?

A)30 units
B)45 units
C)40 units
D)35 units

Question 74

Molina Company has the following sales forecast for the next quarter: April, 20,000 units; May, 24,000 units; June, 28,000 units. Sales totaled 16,000 units in March. The March finished goods inventory was 4,000 units. End-of-month finished goods inventory levels are planned to be equal to 20 percent of the next month's planned sales.
The planned production for Ben Company for April is

A)19,200 units.
B)20,800 units.
C)21,200 units.
D)24,800 units.

Question 75

The following forecasted sales pertain to Rapid City: $$\begin{array} { l r } \text { Month } & \text { Sales } \\\text { June } & \$ 160,000 \\\text { July } & 200,000 \\\text { August } & 120,000 \\\text { September } & 80,000\end{array}$$ Finished goods inventory as of May 31 6,000 units
Rapid City has a selling price of $5 per unit and expects to maintain ending inventories equal to 25 percent of next month's sales.
How many units are expected to be produced in June?

A)36,000 units
B)50,000 units
C)82,000 units
D)42,000 units

Question 76

Alana Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months.
How many units of A2 are expected in the raw material inventory at the end of the second month?

A)30 units
B)45 units
C)40 units
D)35 units

Question 77

Alana Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months.
How many units of A1 does Alana Company expect to use in production during the second month?

A)12,000 units
B)12,500 units
C)10,000 units
D)10,750 units

Question 78

Olga's Company has a sales budget for next month of $150,000. Cost of goods sold is expected to be 40 percent of sales. All goods are purchased in the month used and paid for in the month following purchase. The beginning inventory of merchandise is $5,000, and an ending inventory of $6,000 is desired. Beginning accounts payable is $38,000.
How much merchandise inventory will Olga's need to purchase next month?

A)$61,000
B)$60,000
C)$65,000
D)$59,000

Question 79

Foremost Corporation manufactures boxes. The estimated number of boxes sold for the first three months of the current year are: $$\begin{array} { l l } \text { Month } & \text { Sales } \\\text { January } & 3,000 \\\text { February } & 4,200 \\\text { March } & 3,900\end{array}$$ Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Corporation expects to sell the boxes for $5 each. April sales is projected at 4,500 boxes. What is the expected sales revenue for March?

A)$15,000
B)$21,000
C)$19,500
D)$4,500

Question 80

Burgandy Company produces and sells mattresses. It expects to sell 7,000 mattresses in the current year and had 800 mattresses in finished goods inventory at the end of the previous year. Burgandy would like to complete operations in the current year with at least 900 completed mattresses in inventory. There is no ending work-in-process inventory. The mattresses sell for $500 each. How many mattresses will be produced in the current year?

A)9,450 mattresses
B)8,000 mattresses
C)6,320 mattresses
D)7,100 mattresses