1. 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, arid then amounts are added in.
D) Is executed by upper management.
2. Participative budgeting is an approach to budgeting that
A. is top-down in nature.
B. allows top management to set the budget.
C. discourages budget slack.
D. is more likely to motivate people to work towards the organization's goals.
3. 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.
4. The budget is a component in a financial budget.
A) direct labor
B) capital expenditures
C) budgeted income statement
D) manufacturing overhead
5. 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) Managers do not understand production requirements.
6. Which of the following is an advantage of zero-based budgeting?
A) Zero-based budgeting requires much time to complete.
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.
7. Which of the following statements about employee motivation is true?
A. A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or tight but attainable.
B. A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or tight but attainable.
C. A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.
D. Budgets are difficult to use for motivation.
8. Which of the following budgets uses unit sales, as opposed to production units, for its calculations?
A. Direct Labor
B. Variable Overhead
C. Direct Materials
D. Operating Expenses
9. Which of the following is not a component of the master budget?
A. Operating budgets
B. Budgeted income statement
C. Budgeted balance sheet
D. Budgeted statement of cash flows
10. Which of the following sequences is correct for creating budgets?
A. Sales budget - production budget - direct materials budget - budgeted income statement
B. Production budget - sales budget - direct materials budget - direct labor budget
C. Cash collections budget - production budget - direct labor budget - sales budget
D. Cash collections budget - production budget - sales budget - operating expenses budget
11. Esko has forecast half a year's sales to be the following:
• December: $200,000
• January: $190,000
• February: $125,000
• March: $135,000
• April: $150,000
• May $140,000
The average cost of goods sold is 70% of sales. All sales are on made on credit and sales are collected 60% in the month of the sale, 35% the month following, and 5% is bad debt/uncollectible, written off 90 days after the sale. What are budgeted cash receipts in March?
12. Queen Products expects the following sales of its single product:
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Units
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July
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6,000
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August
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6,500
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September
|
7.200
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October
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7,800
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November
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8.800
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Queen has a sales price of $85 per unit. Queen desires an ending finished goods inventory to be equal to 10% of the next month's sales needs. Each unit requires 3 pounds of direct materials and costs $8 per pound. Queen desires to maintain a raw material inventory equal to 20% of next month's production needs. Each unit requires 1 hour of direct labor with an average wage rate of $17 per hour. Queen plans to spend $200,000 in August on a new factory. Queen pays $1.50 per unit in variable operating costs, $3,000 per month for rent, $1,500 for all other fixed operating costs.
Prepare a production, direct materials purchases AND an operating expenses budget for August.