Master Budget quiz Managerial Accounting Quiz On Feb 1, 2025 Share /20 1234567891011121314151617181920 Master Budget 20 questions in 20 minutes Pass Score 70% The questions change when you repeat the exam 1 / 20 All of the following are considered operating budgets except the : Production budget Sales budget Capital budget Materials 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 2 / 20 The starting point for creating a master budget for a proprietary secretarial school would be : Forecasting enrollment Preparing a capital expenditure budget Estimating salaries of the instructors Preparing the student recruiting 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 3 / 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 includes required direct labor hours It is calculated from the desired ending inventory and the sales forecast It summarizes all discretionary costs It includes required material purchases 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 4 / 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 : 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 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 5 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Capital investment budget Ending inventory budget Pro forma income statement Pro forma statement of financial position 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 6 / 20 Which of the following is normally included in the financial budget of a firm ? Budgeted balance sheet Sales budget 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 7 / 20 In developing a comprehensive budget for a manufacturing company, which one of the following items should be done first ? Development of the capital budget Determination of manufacturing capacity Development of a sales plan Determination of the advertising 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 8 / 20 Which one of the following items is the last schedule to be prepared in the normal budget preparation process ? Manufacturing overhead budget Cash budget Cost of goods sold 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 9 / 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? Direct materials used, direct labor, manufacturing overhead, and work-in-process Cost of goods sold plus or minus the change planned in finished goods Purchases, direct labor, manufacturing overhead, finished goods, and work-inprocess Purchases, raw material, work-in-process, and finished goods 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 10 / 20 After the goals of the company have been established and communicated, the next step in the planning process is development of the : Selling and administrative budget Direct materials budget Sales budget Production 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 11 / 20 The production budget process usually begins with the : Direct materials budget Sales 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 Which budget is prepared after the creation of the cash budget ? Capital expenditures budget Production budget Sales budget Budgeted balance sheet Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 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, direct material budget, revenue budget Revenue budget, direct material budget, production budget Revenue budget, production budget, direct material budget Production budget, revenue budget, direct material 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 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Cash budget Manufacturing overhead budget Direct labor budget Cost of goods sold 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 15 / 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: Production volume and direct material Direct materials and cash flow Production and cash flow Sales and ending inventory 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 16 / 20 In preparing a corporate master budget, which one of the following is most likely to be prepared last ? Cash budget Sales budget Production budget Cost of goods sold 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 17 / 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 18 / 20 The budget that is usually the most difficult to forecast is the : Manufacturing overhead budget Production 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 19 / 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 work-in-process inventories Expected change in the quantity of finished goods and raw material inventories 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 20 / 20 Which of the following is normally included in the operating budget ? Budgeted balance sheet Selling expense budget Capital budget Cash budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 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
