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Exam 10: Budgetary Planning

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Question 1

True/False

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The manufacturing overhead budget generally has separate sections for variable and fixed costs.

A) True
B) False

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Question 2

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In what order are the following budgets prepared? IS.budgeted income statement P.production budget SA.selling and administrative budget MP.materials purchases budget

A) SA, P, MP, IS
B) P, MP, IS, SA
C) P, MP, SA, IS
D) MP, P, SA, IS

E) A) and B)
F) None of the above

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Question 3

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The "bottoms-up" approach to budgeting is also referred to as which of the following?

Why are budgets useful in the planning process?

Use the following information for questions At January 1, 2016, Jake, Inc.has beginning inventory of 4,000 surfboards.Jake estimates it will sell 15,000 units during the first quarter of 2016 with a 10% increase in sales each quarter.Jake's policy is to maintain an ending inventory equal to 25% of the next quarter's sales.Each surfboard costs $200 and is sold for $250. -How much is budgeted sales revenue for the third quarter of 2016?

What information is reflected on the cash budget?

Which one of the following is correct concerning a budget period?

Which one of the following is an advantage of using participative budgeting?

Which of the following statements about a budgeted income statement is true?

The master budget consists of a plan of action for a specified time period.

Which one of the following sets of budgets are financial budgets?

Razmataz Company makes and sells umbrellas.The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year.The following budget data are available: $\begin{array}{c}\begin{array}{l}\\\underline{\text { Item}}\\\text {Sales commissions}\\text {Shipping}\\\text {Advertising}\\\text {Depreciation on office equipment}\\\text {Other operating expenses}\end{array}\begin{array}{c}\text {Variable Cost}\\\underline{\text {Per Unit Sold}}\\\$ 0.60 \\\$ 1.20 \\ \$ 0.30 \\\\ \$ 0.35 \end{array}\begin{array}{c}\\\underline{\text { Monthly Fixed Cost }}\\\$3,000\\\\\\\$ 4,000 \\\$ 34,000\end{array}\end{array}$ Expenses are paid in the month incurred.If the company has budgeted to sell 2,000 umbrellas in October, how much is the total budgeted variable selling expenses for October?

Which one of the following statements is true concerning the master budget for a not-for-profit company?

A budget is more beneficial if accepted by lower level management.

The production budget shows expected unit sales are 1,800.The required production units are 1,700.Which of the following represents possible inventory balances? $\begin{array}{l}\underline{\text { Beginning Units} } & \underline{\text { Ending Units }} \\\end{array}$ a) $\quad$$\quad$$\quad$ 200 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 100 b) $\quad$$\quad$$\quad$ 100 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 200 c) $\quad$$\quad$$\quad$ 200 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 200 d) $\quad$$\quad$$\quad$$\quad$ 0 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 100

Which statement below describes the budgeted balance sheet?

Company A is a manufacturer and Company B is a merchandiser.What is the difference in the budgets the two entities will prepare?

Use the following information for questions Livanos, Inc.reports all its sales on credit, and pays operating costs in the month incurred.Amounts for 2016 are: $\begin{array} { l c c c c c } & \text { March } & \text { April } & \text { May } & \text { June } & \text { July } \\\text { Budgeted sales } & \$ 300,000 & \$ 290,000 & \$ 320,000 & \$ 280,000 & \$ 210,000 \\\text { Budgeted purchases } & \$ 144,000 & \$ 120,000 & \$ 128,000 & \$ 132,000 & \$ 90,000\end{array}$ Customer amounts on account are collected 70% in the month of sale and 30% in the following month. -Cost of goods sold is 60% of sales. -Livanos purchases and pays for merchandise 40% in the month of acquisition and 60% in the following month. -Operating expenses are: Salaries, $50,000; Depreciation, $12,000; Rent, $15,000; and Utilities, $14,000. -Accounts payable is used only for inventory acquisitions. -How much cash will Livanos receive during May from customers?

Which one of the following would most likely cause an unrealistic budget to result?

What information is found on the direct materials budget? I.How many units of direct materials should be purchased? II.How much is the cost of direct materials to be purchased?