Question 1

All of the following are necessary for budgets to be effective except:
A)Goals should be attainable.
B)Employees affected by a budget should be consulted when it is prepared.
C)Evaluations should be made carefully with opportunities to explain differences between actual and budgeted amounts.
D)Managers must be aware of potential negative outcomes of budgeting,such as budgetary slack.
E)All budgeted amounts must be spent to ensure that budgets aren't reduced for the next period.

Accepted Answer

All budgeted amounts do not need to be spent for a budget to be effective. In fact, it is often better to have some remaining funds in case of unexpected expenses. This can also help managers to identify areas where they may have over-budgeted in the future.

Question 2

A formal statement of future plans,usually expressed in monetary terms,is a:
A)Variance report.
B)Position statement.
C)Budget.
D)Prospectus.
E)Variance analysis.

Accepted Answer

A budget is a formal statement of future plans expressed in monetary terms. A variance report and variance analysis refer to comparing actual results to a budget or standard in order to identify differences and potential areas for improvement. A position statement is a broad term that can refer to a company's overall stance on a particular issue or to an individual's formal statement of qualifications and goals. A prospectus is typically a formal document that provides information about an investment opportunity.

Question 3

Production budgets always show both budgeted units of product and total costs for the budgeted units.

Accepted Answer

The answer of Production budgets always show both budgeted units...

Question 4

The sales budget is derived from the production budget.

Accepted Answer

The sales budget is not derived from the production budget. It is the other way around. The production budget is derived from the sales budget. The sales budget outlines the expected sales revenue for the coming period, which helps determine the production quantities needed to meet those sales targets.

Question 5

A company's history indicates that 20% of its sales are for cash and the remaining 80% are on credit.Collections on credit sales are 30% in the month of the sale and 70% the following month.Projected sales for January,February,and March are $75,000,$92,000 and $60,000,respectively.The March expected cash receipts are $80,500.

Accepted Answer

The expected cash receipts for March can be calculated as:
Sales in January: $75,000 x 20% = $15,000 (cash)
Sales in January: $75,000 x 80% = $60,000 (credit)
Collections on January credit sales in January: $60,000 x 30% = $18,000
Collections on January credit sales in February: $60,000 x 70% = $42,000
Collections on January credit sales total: $18,000 + $42,000 = $60,000

Sales in February: $92,000 x 20% = $18,400 (cash)
Sales in February: $92,000 x 80% = $73,600 (credit)
Collections on February credit sales in February: $73,600 x 30% = $22,080
Collections on February credit sales in March: $73,600 x 70% = $51,520
Collections on February credit sales total: $22,080 + $51,520 = $73,600

Sales in March: $60,000 x 20% = $12,000 (cash)
Sales in March: $60,000 x 80% = $48,000 (credit)
Collections on March credit sales in March: $48,000 x 30% = $14,400
Collections on March credit sales in April: $48,000 x 70% = $33,600
Collections on March credit sales total: $14,400 + $33,600 = $48,000

Total expected cash receipts: $15,000 + $18,400 + $12,000 + $60,000 + $22,080 + $14,400 = $141,880, which is greater than the given $80,500. Therefore, the answer is B (False).

Question 6

The manufacturing budgets include the sales budget and the budgeted income statement.

Accepted Answer

The manufacturing budget includes the production budget, direct materials budget, direct labor budget, and manufacturing overhead budget. The sales budget and budgeted income statement are part of the overall operating budget.

Question 7

The financial statement effects of the budgeting process are summarized on the cash budget and the capital expenditures budget.

Accepted Answer

The answer of The financial statement effects of the budgeting...

Question 8

Part of the cash budget is based on information taken from the capital expenditures budget.

Accepted Answer

The cash budget includes all anticipated cash inflows and outflows, which are influenced by various factors including the capital expenditures budget. The capital expenditures budget outlines the company's planned investments in long-term assets, such as equipment and property, which can have a significant impact on cash flow in future periods. Therefore, the cash budget should incorporate information from the capital expenditures budget to accurately forecast cash flows.

Question 9

A manufacturing budget shows dollar amounts estimated to be spent to purchase additional plant assets and amounts expected to be received from plant asset disposals.

Accepted Answer

A manufacturing budget includes estimates of production costs such as direct materials, direct labor, and overhead expenses. It does not typically include information about plant asset purchases or disposals, which would be included in a capital expenditures budget.

Question 10

Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating non-value-added activities.

Accepted Answer

Activity-based budgeting focuses on identifying and allocating costs to activities that create value for the customer. It helps to identify non-value-added activities and find ways to eliminate them or reduce their costs. Traditional budgeting, on the other hand, is based on historical data and tends to perpetuate existing cost structures without questioning the underlying assumptions. Therefore, activity-based budgeting is generally better suited for reducing costs by eliminating non-value-added activities.

Question 11

The budgeted balance sheet and income statement are normally completed after preparation of operating and capital expenditure budgets.

Accepted Answer

The budgeted balance sheet and income statement are typically completed after the operating and capital expenditure budgets have been prepared, as they rely on the information and assumptions made in those budgets.

Question 12

A capital expenditures budget is prepared before the operating budgets.

Accepted Answer

The answer of A capital expenditures budget is prepared before...

Question 13

The budget process rarely coincides with the accounting period.

Accepted Answer

The answer of The budget process rarely coincides with the...

Question 14

Activity-based budgeting is a budget system based on expected activities and their levels for the budget period,which helps management plan for the resources required.

Accepted Answer

Activity-based budgeting is a budget system that focuses on expected activities and their levels, allowing management to plan for the necessary resources.

Question 15

A cash budget shows the expected cash receipts and cash expenditures during the budget period.

Accepted Answer

A cash budget is a financial statement that outlines the expected cash inflows (receipts) and outflows (expenditures) for a specific period of time. Therefore, the statement is true.

Question 16

The process of planning future business actions and expressing them as a formal plan is called:
A)Budgeting.
B)Cost accounting.
C)Managerial accounting.
D)Variance analysis.
E)Standard cost analysis.

Accepted Answer

Budgeting involves planning and expressing future business actions in a formal plan. Cost accounting, managerial accounting, variance analysis, and standard cost analysis are all related to financial management but do not specifically involve planning future business actions as a formal plan.

Question 17

The budgeted balance sheet is prepared primarily from data contained in the previously prepared components of the master budget.

Accepted Answer

The budgeted balance sheet is a part of the master budget and is prepared using the financial data from various components of the master budget, such as sales forecast, production budget, operating expenses budget, and capital expenditures budget.

Question 18

The selling expenses budget is normally prepared before the sales budget because selling expenses affect the amount of sales.

Accepted Answer

The answer of The selling expenses budget is normally prepared...

Question 19

If budgeted beginning inventory is $8,300,budgeted ending inventory is $9,400,and cost of goods sold is expected to be $10,260,then budgeted purchases should be $11,360.
Budgeted purchases = $9,400 + $10,260 - $8,300 = $11,360

Accepted Answer

This is the correct calculation for determining budgeted purchases based on the given information.

Question 20

A master budget refers to a company's sales budget that includes all of its segments or departments.

Accepted Answer

A master budget includes all of a company's budgets, not just the sales budget. It includes budgets for expenses, capital expenditures, cash flow, and more.

Quiz 22: Master Budgets and Planning

All of the following are necessary for budgets to be effective except:

A formal statement of future plans,usually expressed in monetary terms,is a: