Question 1

A formal budget program will almost always result in:

Accepted Answer

A formal budget program provides a detailed plan for the company's finances and helps in comparing actual results with the budgeted ones. It may or may not result in higher sales or decreased expenses or improved profits, but it ensures that there are more cash inflows than outflows as it involves careful planning and monitoring of cash flow.

Question 2

Which of the following would be considered when preparing a company's sales forecast?

Accepted Answer

The answer of Which of the following would be considered...

Question 3

A company's sales forecast would likely consider all of the following factors except:

Accepted Answer

Top management's attitude toward decentralized operating structures is not directly related to a company's sales forecast. The other factors listed are all potential considerations for a company's sales forecast.

Question 4

A budget serves as a benchmark against which:

Accepted Answer

A budget is a tool used to plan and allocate resources for a specific period of time. By comparing actual results against the budget, organizations are able to determine whether they are operating efficiently and effectively. Comparing allocated results to the budget can also be helpful in determining if resources were appropriately allocated. Therefore, option A is the correct answer. Option C and D are incorrect because actual and allocated results are both important in evaluating performance. Option E is not relevant as cash balances are not the only factor in evaluating a budget.

Question 5

Which of the following budgets is based on many other master-budget components?

Accepted Answer

The answer of Which of the following budgets is based...

Question 6

The comprehensive set of budgets that serves as a company's overall ﬁnancial plan is commonly known as:

Accepted Answer

A set of budgets that serves as a comprehensive financial plan for a company is called a master budget. It consists of individual budgets for sales, production, inventory, labor, expenses, and capital expenditures. The master budget is crucial in achieving the company's financial goals because it provides detailed information on how the company will perform financially over time. The budget typically covers a fiscal year and serves as a guideline for the company's operations and decision-making processes.

Question 7

Salizar Corporation is budgeting its equipment needs on an on-going basis, with a new quarter being added to the budget as the current quarter is completed.This type of budget is most commonly known as a:

Accepted Answer

A rolling budget is a budgeting method where another budget period (usually a quarter) is added as the current budget period is completed. This allows for continuous budgeting and forecasting, making it easier for companies to adjust and plan for changes in the business environment. Therefore, a rolling budget is the best choice for the described scenario.

Question 8

Generally speaking, budgets are not used to:

Accepted Answer

Budgets are more commonly used for planning, control, coordination, and performance evaluation rather than identifying a company's most profitable products. Identifying profitable products is generally done through product analysis and financial analysis.

Question 9

A company's expected receipts from sales and planned disbursements to pay bills is commonly called a:

Accepted Answer

The description given matches the definition of a cash budget, which is a financial plan that outlines a company's expected cash inflows and outflows over a specific period (usually a month or a quarter). It helps businesses manage their cash flow and ensure that they have enough funds to cover their expenses and investment needs. A pro-forma budget and a master budget are broader financial plans that include multiple budgets, including a cash budget. A financial budget is a budget that outlines a company's anticipated revenues, expenses, and profits. A profit plan is a budget that focuses on a company's expected profits and margins.

Question 10

A company's plan for the issuance of stock or incurrence of debt is commonly called a:

Accepted Answer

A financial budget outlines a company's plan for managing its financial resources, including the issuance of stock or incurrence of debt.

Question 11

A company's plan for the acquisition of long-lived assets, such as buildings and equipment, is commonly called a:

Accepted Answer

A company's plan for the acquisition of long-lived assets is commonly called a capital budget. This budget outlines the amount of money that should be allocated to buy or improve long-term assets, and it helps the company to plan its investments and manage its cash flows.

Question 12

An organization's budgets will often be prepared to cover:

Accepted Answer

Budgets can be prepared for various time frames, including one month, one quarter, one year, or even longer periods, depending on the organization's needs and planning requirements.

Question 13

Which of the following choices correctly denotes managerial functions that are commonly associated with budgeting?

Accepted Answer

The answer of Which of the following choices correctly denotes...

Question 14

A manufacturing ﬁrm would begin preparation of its master budget by constructing a:

Accepted Answer

The first step in preparing a master budget is to create a sales budget, as it provides the basis for all other budgets. The sales budget should be created before any other budgets that depend on it, such as the production budget, which would be the next step in the process. The cash budget and capital budget are also important parts of the master budget, but they would be developed after the sales and production budgets. Pro-forma financial statements would be developed as a part of the overall master budget, but they would not be the first step in the process.

Question 15

A company's sales forecast would likely consider all of the following factors except:

Accepted Answer

The company's product costing policy is not directly related to sales forecast as it pertains to the cost of producing the product, rather than the projected sales.

Question 16

Which of the following statements best describes the relationship between the sales-forecasting process and the master-budgeting process?

Accepted Answer

The sales forecast is typically completed before the master budget and has significant impact on it. This is because the sales forecast is a critical input for the master budgeting process, as it helps in determining the revenue projections and hence the budgeted income statement. The accuracy and reliability of the sales forecast greatly influences the master budget and its associated budgets such as production, inventory, and operating expenses. Therefore, the sales-forecasting process and the master-budgeting process are closely linked and interdependent.

Question 17

The master budget contains the following components, among others: (1) direct-material budget, (2) budgeted balance sheet, (3) production budget, and (4) cash budget.Which of these components would be prepared ﬁrst and which would be prepared last?

Accepted Answer

The answer of The master budget contains the following components,...

Question 18

Which of the following would depict the logical order for preparing (1) a production budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget?

Accepted Answer

The logical order starts with a sales budget (3) because it estimates the number of units expected to be sold, which informs the production budget (1) to determine how many units need to be produced. This then influences the direct-labor budget (4), which estimates the labor cost required for production. Finally, the cash budget (2) is prepared, incorporating all previous budgets to project the company's cash inflows and outflows.

Question 19

Which of the following budgets is prepared at the end of the budget-construction cycle?

Accepted Answer

The budgeted financial statements are prepared at the end of the budget-construction cycle as they incorporate all of the individual operating budgets (sales, production, overhead, etc.) and provide an overall projected financial picture for the upcoming period.

Question 20

The budgeted income statement, budgeted balance sheet, and budgeted statement of cash ﬂows comprise:

Accepted Answer

The budgeted income statement, budgeted balance sheet, and budgeted statement of cash flows are the final portion of the master budget, which is a comprehensive financial plan that outlines an organization's goals and objectives for a specific period, typically a year. The budgeted financial statements are based on the sales forecast and the various operating and financial assumptions made in the budgeting process. As such, they provide a roadmap for the organization's financial performance over the budget period and are critical for monitoring and controlling expenses, managing cash flow and resources, and achieving the organization's financial objectives.

Quiz 9: Financial Planning and Analysis: the Master Budget

A formal budget program will almost always result in:

Which of the following would be considered when preparing a company's sales forecast?

A company's sales forecast would likely consider all of the following factors except:

A budget serves as a benchmark against which:

Which of the following budgets is based on many other master-budget components?

The comprehensive set of budgets that serves as a company's overall ﬁnancial plan is commonly known as:

Salizar Corporation is budgeting its equipment needs on an on-going basis, with a new quarter being added to the budget as the current quarter is completed.This type of budget is most commonly known as a:

Generally speaking, budgets are not used to:

A company's expected receipts from sales and planned disbursements to pay bills is commonly called a:

A company's plan for the issuance of stock or incurrence of debt is commonly called a:

A company's plan for the acquisition of long-lived assets, such as buildings and equipment, is commonly called a:

An organization's budgets will often be prepared to cover:

Which of the following choices correctly denotes managerial functions that are commonly associated with budgeting?

A manufacturing ﬁrm would begin preparation of its master budget by constructing a:

A company's sales forecast would likely consider all of the following factors except:

Which of the following statements best describes the relationship between the sales-forecasting process and the master-budgeting process?

The master budget contains the following components, among others: (1) direct-material budget, (2) budgeted balance sheet, (3) production budget, and (4) cash budget.Which of these components would be prepared ﬁrst and which would be prepared last?

Which of the following would depict the logical order for preparing (1) a production budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget?

Which of the following budgets is prepared at the end of the budget-construction cycle?

The budgeted income statement, budgeted balance sheet, and budgeted statement of cash ﬂows comprise: