Master Budget quiz Managerial Accounting Quiz On Mar 12, 2024 Share /20 1234567891011121314151617181920 Master Budget 20 questions in 20 minutes Answers at the end of the exam Pass Score 70% The questions change when you repeat the exam enter full-screen mode by pressing the icon located in the top- right comer of the exam 1 / 20 While an operating budget is a key element in planning and control, it is not likely to: Provide subsidiary planning information Establish a commitment of company resources Integrate organizational activities 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 2 / 20 After the goals of the company have been established and communicated, the next step in the planning process is development of the : Production budget Selling and administrative budget Sales budget Direct materials budget The sales budget is the first step in the operating budget process because it is needed to prepare all of the other budgets. For example, the production budget cannot be prepared until the sales department has determined how many units are needed 3 / 20 Which budget is prepared after the creation of the cash budget ? Budgeted balance sheet Production budget Sales budget Capital expenditures budget Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 4 / 20 The financial budget process includes : The budgeted statement of cash flows The cash budget All of the answers are correct The capital budget The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 5 / 20 When preparing the series of annual operating budgets, management usually starts the process with the : Balance sheet Capital budget Cash budget Sales 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 6 / 20 The master budget process usually begins with the : Operating budget Sales budget Financial 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 7 / 20 The starting point for creating a master budget for a proprietary secretarial school would be : Estimating salaries of the instructors Preparing the student recruiting budget Forecasting enrollment Preparing a capital expenditure budget 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 8 / 20 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Cost of goods sold budget Cash budget Manufacturing overhead 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 9 / 20 Which one of the following items is the last schedule to be prepared in the normal budget preparation process ? Selling expense budget Cost of goods sold budget Cash budget Manufacturing overhead budget The last schedule prepared before the financial statements is the cash budget. The cash budget is a schedule of estimated cash collections and payments. The various operating budgets and the capital budget are inputs to the cash budgeting process 10 / 20 In an organization that plans by using comprehensive budgeting, the master budget is : A compilation of all the separate operational and financial budget schedules of the organization The booklet containing budget guidelines, policies, and forms to use in the budgeting process A budget of a not-for-profit organization after it is approved by the appropriate authoritative body The current budget updated for operations for part of the current year A company’s overall budget, often called the master or comprehensive budget, encompasses the organization’s operating and financial plans for a specified period, ordinarily a year. Thus, all other budgets are subsets of the master budget. In the operating budget, the emphasis is on obtaining and using current resources. In the financial budget, the emphasis is on obtaining the funds needed to purchase operating assets 11 / 20 The master budget : Contains the operating budget Shows forecasted and actual results Reflects controllable costs only Can be used to determine manufacturing cost variances All other budgets are subsets of the master budget. Thus, quantified estimates by management from all functional areas are contained in the master budget. These results are then combined in a formal quantitative model recognizing the organization’s objectives, inputs, and outputs 12 / 20 The production budget process usually begins with the : Direct labor budget Manufacturing overhead budget Direct materials budget Sales 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 13 / 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 Raw material inventory, direct labor hours, and manufacturing overhead costs Production volume, finished goods inventory, and sales volume Direct labor hours, work-in-process 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 14 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Ending inventory budget Pro forma statement of financial position Pro forma income statement Capital investment 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 15 / 20 The foundation of a profit plan is the : Sales forecast Cost and expense budget Capital budget Production 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 16 / 20 The operating budget process usually begins with the : Sales budget Balance sheet Income statement Financial 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 17 / 20 All of the following are considered operating budgets except the : Capital budget Materials budget Sales budget Production budget The operating budget consists of all budgets that concern normal operating activities, including the sales budget, production budget, materials budget, direct labor budget, and factory overhead budget. The capital expenditures budget, which outlines needs for new capital investment, is not a part of normal operations. The capital expenditures budget is sometimes prepared more than a year in advance to allow sufficient time to secure financing for these major expenditures 18 / 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? Purchases, raw material, work-in-process, and finished goods Cost of goods sold plus or minus the change planned in 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 19 / 20 Which of the following is normally included in the financial budget of a firm ? Budgeted balance sheet Direct materials budget Sales budget Selling expense budget The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 20 / 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 Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback 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