Master Budget quiz Managerial Accounting Quiz On Jan 2, 2026 Share Master Budget 20 questions in 20 minutes Pass Score 70% The questions change when you repeat the exam 1 / 20 In preparing a corporate master budget, which one of the following is most likely to be prepared last ? Cost of goods sold budget Sales budget Production budget Cash budget The cash budget is the lynchpin of the financial budget. It combines the results of the operating budget with the cash collection and disbursement schedules to produce a comprehensive picture of where the company’s cash flows are expected to come from and where they are expected to go. All the other budgets listed feed the cash budget in one way or another 2 / 20 Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that would provide the necessary input data for the direct labor budget would be the : Sales forecast Schedule of cash receipts and disbursements Raw materials purchases budget Production budget Once the production budget has been completed, the next step is to prepare the direct labor, raw material, and overhead budgets. Thus, the production budget provides the data for the completion of the direct labor budget 3 / 20 When sales volume is seasonal in nature, certain items in the budget must be coordinated. The three most significant items to coordinate in budgeting seasonal sales volume are : Raw material inventory, work-in-process inventory, and production volume Direct labor hours, work-in-process inventory, and sales volume Raw material inventory, direct labor hours, and manufacturing overhead costs Production volume, finished goods inventory, and sales volume The most important items that need to be coordinated in a seasonal business are sales volume and production. The sales budget is the basis for other budgets. The sales projection determines how much needs to be purchased and produced. In turn, projected sales and production (or purchases) must be coordinated with existing quantities on hand (inventory) and with amounts to be held in the future. If a manufacturer faces sharp variations in demand, this coordination becomes especially crucial 4 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Strategic budget Production budget Capital investment budget Cash management and working capital budget The creation of a comprehensive master budget begins with the preparation of the sales budget and ends with the preparation of the cash management and working capital budget 5 / 20 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Manufacturing overhead budget Cash budget Cost of goods sold budget Direct labor budget The budget process begins with the sales budget, proceeds to the production and expense budgets, and eventually the cash budget. The cash budget cannot be prepared until the end of the process because all other budgets provide inputs to the cash budget 6 / 20 Which one of the following items should be done first when developing a comprehensive budget for a manufacturing company ? Development of the capital budget Determination of the advertising budget Development of a sales budget Preparation of a pro forma income statement The sales budget is the first to be prepared because all other elements of a comprehensive budget depend on projected sales. For example, the production budget is based on an estimate of unit sales and desired inventory levels. Thus, sales volume affects purchasing levels, operating expenses, and cash flow 7 / 20 Which of the following is normally included in the financial budget of a firm ? Sales budget Budgeted balance sheet Selling expense budget Direct materials budget The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 8 / 20 When budgeting, the items to be considered by a manufacturing firm in going from a sales quantity budget to a production budget would be the : Expected change in the availability of raw material without regard to inventory levels Expected change in the quantity of finished goods and raw material inventories Expected change in the quantity of work-in-process inventories Expected change in the quantity of finished goods and work-in-process inventories Production quantities are not identical to sales because of changes in inventory levels. Both finished goods and work-in-process inventories may change during a period, thus necessitating an analysis of both inventory levels before the production budget can be set 9 / 20 The starting point for creating a master budget for a proprietary secretarial school would be : Preparing the student recruiting budget Preparing a capital expenditure budget Estimating salaries of the instructors Forecasting enrollment The sales forecast drives all the other components of the operating budget. How much revenue the firm expects to bring in affects every other decision 10 / 20 There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the following best describes the production budget ? It summarizes all discretionary costs It is calculated from the desired ending inventory and the sales forecast It includes required material purchases It includes required direct labor hours A production budget is based on sales forecasts, in units, with adjustments for beginning and ending inventories. It is used to plan when items will be produced. After the production budget has been completed, it is used to prepare materials purchases, direct labor, and factory overhead budgets 11 / 20 The production budget process usually begins with the : Sales budget Direct materials budget Manufacturing overhead budget Direct labor budget Neither a master budget nor a production budget can be prepared until after the sales budget has been completed. Once a firm knows its expected sales, production can be estimated. The production budget is based on assumptions appearing in the sales budget; thus, the sales budget is the first step in the preparation of a production budget 12 / 20 The operating budget process usually begins with the : Financial budget Income statement Sales budget Balance sheet The starting point for the annual budget is the sales forecast. All other aspects of the budget, including production, costs, and inventory levels, rely on projected sales figures 13 / 20 Which one of the following best describes the order in which budgets should be prepared when developing the annual master operating budget ? Production budget, revenue budget, direct material budget Revenue budget, direct material budget, production budget Revenue budget, production budget, direct material budget Production budget, direct material budget, revenue budget The components of the operating budget are prepared in the following order: sales (revenue) budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, ending finished goods inventory budget, cost of goods sold budget, and nonmanufacturing budget 14 / 20 In developing a comprehensive budget for a manufacturing company, which one of the following items should be done first ? Determination of the advertising budget Development of the capital budget Determination of manufacturing capacity Development of a sales plan The starting point for the annual budget is the sales forecast. All other aspects of the budget, including production, costs, and inventory levels, rely on projected sales figures 15 / 20 ELG Manufacturing, Inc., produces farm tractors. The details of its budgeted cost of goods manufactured schedule should come from which of the following schedules? Cost of goods sold plus or minus the change planned in finished goods Purchases, raw material, work-in-process, and finished goods Direct materials used, direct labor, manufacturing overhead, and work-in-process Purchases, direct labor, manufacturing overhead, finished goods, and work-inprocess Cost of goods manufactured equals all manufacturing costs incurred during the period, plus beginning work-inprocess inventory, minus ending work-in-process inventory. The cost of goods manufactured schedule therefore includes direct materials, direct labor, factory overhead, and changes in work-in-process inventories 16 / 20 While an operating budget is a key element in planning and control, it is not likely to: Integrate organizational activities Provide subsidiary planning information Establish a commitment of company resources Set out long-range, strategic concepts Operating budgets seldom set out long-range strategic concepts because they usually deal with the quantitative allocation of people and resources. Strategic concepts are overall goals for the organization and are almost always stated in words 17 / 20 ELG Company is anticipating that a major supplier might experience a strike this year. Because of the nature of the product and emphasis on quality, extra production cannot be stored as finished goods inventory. When developing a contingency budget that would anticipate a direct materials buildup, the two most significant items that will be affected are: Direct materials and cash flow Production and cash flow Sales and ending inventory Production volume and direct material The most significant items are those that will vary between the contingency budget and the regular budget. The company cannot increase its finished goods inventory, but it can increase its inventory of the direct materials provided by the supplier. Thus, the items most affected will be direct materials and cash. The cash budget will be affected because of the need to pay for direct materials prior to their usage 18 / 20 When preparing the series of annual operating budgets, management usually starts the process with the : Sales budget Cash budget Balance sheet Capital budget The budgeting process begins with the sales budget and then proceeds to the production budget. Once the production budget is complete, then the raw materials, direct labor, overhead, and cash budgets can be prepared. The capital budget is prepared outside the operating budget process, followed by a cash budget 19 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Pro forma statement of financial position Pro forma income statement Capital investment budget Ending inventory budget The capital investment budget may be prepared more than a year in advance, unlike the other elements of the master budget. Because of the long-term commitments that must be made for some types of capital investments, planning must be done far in advance and is based on needs in future years as opposed to the current year’s needs 20 / 20 The master budget process usually begins with the : Sales budget Financial budget Operating budget Production budget The starting point for the annual budget is the sales forecast. All other aspects of the budget, including production, costs, and inventory levels, rely on projected sales figures Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback Follow the Facebook page Accountants Quiz and join the group Accounting Quiz 2017. budgeted sala flexible budget variance is calculated by comparing the master budget to the flexible budget.a key difference between a master budget prepared for a merchandiser versus a manufacturer is
