Master Budget quiz Managerial Accounting Quiz On Mar 4, 2026 Share Follow the Facebook page Accountants Quiz and join the group Accounting Quiz Master Budget 20 questions in 20 minutes Pass Score 70% The questions change when you repeat the exam 1 / 20 Which of the following is normally included in the financial budget of a firm ? Selling expense budget Direct materials budget Sales budget Budgeted balance sheet The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 2 / 20 The budget that is usually the most difficult to forecast is the : Expense budget Manufacturing overhead budget Sales budget Production 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 3 / 20 After the goals of the company have been established and communicated, the next step in the planning process is development of the : Direct materials budget Sales budget Production 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 4 / 20 Which one of the following best describes the order in which budgets should be prepared when developing the annual master operating budget ? Revenue budget, production budget, direct material budget Production budget, revenue budget, direct material budget Production budget, direct material budget, revenue budget Revenue budget, direct material budget, production 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 5 / 20 In preparing a corporate master budget, which one of the following is most likely to be prepared last ? Production budget Sales budget Cost of goods sold 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 6 / 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 Raw material inventory, work-in-process inventory, and production volume 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 7 / 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 Development of a sales plan Determination of manufacturing capacity 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 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 Set out long-range, strategic concepts Integrate organizational activities 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 9 / 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 : Production budget Schedule of cash receipts and disbursements Sales forecast 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 10 / 20 The master budget : Can be used to determine manufacturing cost variances Contains the operating budget Shows forecasted and actual results Reflects controllable costs only 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 11 / 20 The operating budget process usually begins with the : Income statement Financial budget 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 12 / 20 The master budget process usually begins with the : Production budget Sales budget Operating budget 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 13 / 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 raw material inventories Expected change in the quantity of finished goods and work-in-process 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 14 / 20 Which one of the following items is the last schedule to be prepared in the normal budget preparation process ? Selling expense budget Cash budget Manufacturing overhead budget Cost of goods sold 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 15 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Production budget Strategic budget Cash management and working capital budget Capital investment 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 16 / 20 When preparing the series of annual operating budgets, management usually starts the process with the : Cash budget Sales 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 17 / 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 Determination of the advertising 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 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? 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, raw material, work-in-process, and finished goods 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 In an organization that plans by using comprehensive budgeting, the master budget is : The current budget updated for operations for part of the current year A budget of a not-for-profit organization after it is approved by the appropriate authoritative body 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 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 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 volume and direct material 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 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
