Chapter 8 Quiz

Question 1

The budgeted income statement is typically prepared before the budgeted balance sheet. True or False?

Answer 1

True.

Question 2

The manufacturing overhead budget lists all costs of production other than direct materials and direct labor. True or False?

Answer 2

True.

Question 3

The production budget is typically prepared before the direct materials budget. True or False?

Answer 3

True.

Question 4

One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers. True or False?

Answer 4

False.

Question 5

Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period. True or False?

Answer 5

True.

Question 6

The production budget is typically prepared prior to the sales budget. True or False?

Answer 6

False.

Question 7

One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks. True or False?

Answer 7

False.

Question 8

Budgets are used for the distinct purpose of planning and profit. True or False?

Answer 8

False.

Question 9

The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit. True or False?

Answer 9

True.

Question 10

A benefit from budgeting is that it forces managers to think about and plan for the future. True or False?

Answer 10

True.

Question 11

Which of the following statements is NOT correct concerning the Cash Budget?

A) The Cash Budget should be prepared before the Budgeted Income Statement.
B) The Cash Budget should be prepared before the Budgeted Balance Sheet.
C) It is not necessary to prepare any other budgets before preparing the Cash Budget.
D) The Cash Budget builds on earlier budgets and schedules as well as additional data.

Answer 11

It is not necessary to prepare any other budgets before preparing the Cash Budget.

Question 12

Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget?

A) The Manufacturing Overhead Budget shows the expected cash disbursements for manufacturing overhead.
B) The Manufacturing Overhead Budget provides a schedule of all costs of production other than direct materials and labor costs.
C) The Manufacturing Overhead Budget is prepared after the Sales Budget.
D) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.

Answer 12

The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.

Question 13

The usual starting point for a master budget is:

A )The budgeted income statement.
B) The direct materials purchase budget.
C) The sales forecast or sales budget.
D) The production budget.

Answer 13

The sales forecast or sales budget.

Question 14

Which of the following statements is true with respect to a budgeted balance sheet?

A) Beginning retained earnings + net income − dividends = ending retained earnings.
B)
Beginning retained earnings − net income + dividends = ending retained earnings.
C) Beginning retained earnings − net income − dividends = ending retained earnings.
D) Beginning retained earnings + net income + dividends = ending retained earnings.

Answer 14

Beginning retained earnings + net income- dividends = ending retained earnings.

Question 15

Which of the following statements is false?

A) Budgets communicate management’s plans throughout the organization.
B) Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.
C) Budgets force managers to think about and plan for the future.
D) Budgets enable each department to function independently from other departments.

Answer 15

Budgets enable each department to function independently from other departments.

Question 16

Which of the following statements is true with respect to a budgeted balance sheet?

A) The ending cash balance on the balance sheet equals the net income on the income statement.
B) The accounts payable balance includes the expected cash payments for material purchases that were made during the most recently completed month.
C) The ending cash balance on the balance sheet equals the ending cash balance on the cash budget.
D) The accounts receivable balance includes the uncollected credit sales from the most recently completed month plus the expected cash collections from credit sales that were made two months ago.

Answer 16

The ending cash balance on the balance sheet equals the ending cash balance on the cash budget.

Question 17

Which of the following statements is false with respect to a cash budget?

A) It includes cash paid for manufacturing overhead costs.
B) It excludes dividends because they are subtracted from retained earnings on the balance sheet.
C) It excludes sales and instead reports cash collections from customers.
D) It includes cash paid for selling and administrative costs.

Answer 17

It excludes dividends because they are subtracted from retained earnings on the balance sheet.

Question 18

Which of the following statements is false with respect to a budgeted income statement?

A) Its interest expense flows from the financing section of the cash budget.
B) Its net income will impact the ending retained earnings balance shown on the balance sheet.
C) Its cost of goods sold is derived from the corresponding dollar amount shown in the production budget.
D) Its selling and administrative expenses may include depreciation expense even though it is not a cash flow.

Answer 18

Its cost of goods sold is derived from the corresponding dollar amount shown in the production budget.

Question 19

Which of the following equations is used in a merchandise purchases budget?

A) Budgeted cost of goods sold + desired beginning merchandise inventory − ending merchandise inventory = Required purchases
B) Budgeted cost of goods sold + desired ending merchandise inventory − beginning merchandise inventory = Required purchases
C)
Budgeted cost of goods sold − desired beginning merchandise inventory + ending merchandise inventory = Required purchases
D) Budgeted cost of goods sold − desired ending merchandise inventory + beginning merchandise inventory = Required purchases

Answer 19

Budgeted cost of goods sold + desired ending merchandise inventory - beginning merchandise inventory = Required purchases.

Question 20

Which of the following equations is used to prepare a production budget?

A) Budgeted unit sales + Desired units of ending finished goods inventory − Units of beginning finished goods inventory = Required production in units
B) Budgeted unit sales − Desired units of ending finished goods inventory + Units of beginning finished goods inventory = Required production in units
C) Budgeted unit sales + Desired units of beginning finished goods inventory − Units of ending finished goods inventory = Required production in units
D) Budgeted unit sales − Desired units of beginning finished goods inventory + Units of ending finished goods inventory = Required production in units

Answer 20

Budgeted unit sales + Desired units of ending finished goods inventory -Units of beginning finished goods inventory = Required production in units.

Question 21

The selling and adminstrative budget is typically prepared before the cash budget. True or False?

Answer 21

True

Question 22

Control involves developing goals and preparing various budgets to achieve those goals. True or False?

Answer 22

False (That refers to planning).

Question 23

The direct labor budget shows the direct labor-hours required to satisfy the production budget. True or False?

Answer 23

True.

Question 24

The production budget is typically prepared prior to the sales budget. True or False?

Answer 24

False.

Question 25

When preparing a direct materials budget, the required purchases of raw materials in units equals:

A) Raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials.
B) Raw materials needed to meet the production schedule − desired ending inventory of raw materials − beginning inventory of raw materials.
C) Raw materials needed to meet the production schedule − desired ending inventory of raw materials + beginning inventory of raw materials.
D) Raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

Answer 25

Raw materials needed to meet the production schedule + desired ending inventory of raw materials- beginning inventory of raw materials.

Question 26

Which of the following estimates is not used in preparing a sales budget including a schedule of expected cash collections?

A) The selling price per unit
B) The number of units produced
C) The credit sales collection pattern
D) The number of units sold

Answer 26

The number of units produced.

Question 27

Which of the following statements is false with respect to a budgeted income statement?

A) Its net income will impact the ending retained earnings balance shown on the balance sheet.
B) Its selling and administrative expenses may include depreciation expense.
C) Its interest expense flows from the financing section of the cash budget.
D) Its net income should equal the net cash flows from the cash budget.

Answer 27

Its net income should equal the net cash flows from the cash budget.

Question 28

Which of the following statements is true regarding master budgets?

A) Most companies exclude selling and administrative expenses from the master budget because they are period expenses.
B) They usually include a cash budget and a budgeted income statement, but not a budgeted balance sheet.
C) They can be used to estimate a company’s need to borrow money in the future.
D) Generally speaking, they are prepared for manufacturing companies, but not merchandising companies.

Answer 28

They can be used to estimate a company’s need to borrow money in the future.

Question 29

The master budget consists of a number of separate but interdependent budgets. True or False?

Answer 29

True.

Question 30

Which of the following budgets are prepared before the sales budget?

 Budgeted Income Statement	      Direct Labor Budget A)	                    Yes	                                            Yes B)	                    Yes	                                            No C)	                    No	                                            Yes D)	                    No	                                            No

A) Choice C
B) Choice B
C) Choice A
D) Choice D

Answer 30

Choice D: No, No.

Question 31

Which of the following is not one of the sections within a cash budget?

A) The investing section
B) The financing section
C) The cash disbursements section
D) The cash receipts section

Answer 31

The investing section.