Master Budget quiz Managerial Accounting Quiz On Aug 17, 2024 Share /20 1234567891011121314151617181920 Master Budget 20 questions in 20 minutes Pass Score 70% The questions change when you repeat the exam 1 / 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 Sales budget Direct materials budget Selling and administrative 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 2 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Cash management and working capital budget Production budget Capital investment budget Strategic 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 3 / 20 Which of the following is normally included in the operating budget ? Selling expense budget Budgeted balance sheet Cash budget Capital budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 4 / 20 In developing a comprehensive budget for a manufacturing company, which one of the following items should be done first ? Determination of manufacturing capacity Development of the capital budget Determination of the advertising budget 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 5 / 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 Production budget Schedule of cash receipts and disbursements Raw materials purchases 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 6 / 20 The foundation of a profit plan is the : Capital budget Sales forecast Cost and expense 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 7 / 20 In an organization that plans by using comprehensive budgeting, the master budget is : 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 compilation of all the separate operational and financial budget schedules of the organization 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 8 / 20 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Cash budget Direct labor budget Cost of goods sold budget Manufacturing overhead 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 The master budget : Can be used to determine manufacturing cost variances Contains the operating budget Reflects controllable costs only Shows forecasted and actual results 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 10 / 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 11 / 20 The production budget process usually begins with the : Direct materials budget Manufacturing overhead budget Direct labor 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 12 / 20 The budget that is usually the most difficult to forecast is the : Production budget Manufacturing overhead budget Expense budget Sales budget Following the preparation of the sales budget, all other budgets are prepared based on the assumptions used in the sales budget. For this reason, the sales budget is the most difficult to prepare because there are no internal figures to use as a guide. Sales are based on the desires of consumers and the current business climate 13 / 20 Which one of the following items is the last schedule to be prepared in the normal budget preparation process ? Manufacturing overhead budget Cost of goods sold budget Cash budget Selling expense 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 14 / 20 The starting point for creating a master budget for a proprietary secretarial school would be : Forecasting enrollment Preparing the student recruiting budget Estimating salaries of the instructors 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 15 / 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 Development of a sales budget Preparation of a pro forma income statement Determination of the advertising budget 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 16 / 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, direct labor hours, and manufacturing overhead costs Direct labor hours, work-in-process inventory, and sales volume Production volume, finished goods inventory, and sales volume Raw material inventory, work-in-process inventory, and production 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 17 / 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 quantity of finished goods and work-in-process inventories Expected change in the quantity of finished goods and raw material inventories Expected change in the availability of raw material without regard to inventory levels Expected change in the quantity of 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 18 / 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 19 / 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 20 / 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 Cash budget Production 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 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
