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 When preparing the series of annual operating budgets, management usually starts the process with the : Balance sheet Cash budget Sales budget 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 2 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Production budget Cash management and working capital 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 The budget that is usually the most difficult to forecast is the : Manufacturing overhead budget Sales budget Production budget Expense 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 4 / 20 Which of the following is normally included in the financial budget of a firm ? Direct materials budget Budgeted balance sheet Selling expense budget Sales 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 All of the following are considered operating budgets except the : Production budget Capital budget Sales 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 6 / 20 Which one of the following items is the last schedule to be prepared in the normal budget preparation process ? Cash budget Selling expense budget Cost of goods sold 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 7 / 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 work-in-process 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 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 8 / 20 The operating budget process usually begins with the : Sales budget Financial budget Balance sheet Income statement 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 9 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Ending inventory budget Pro forma income statement Pro forma statement of financial position 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 10 / 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 : Raw materials purchases budget Sales forecast Production budget Schedule of cash receipts and disbursements 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 11 / 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 12 / 20 The master budget process usually begins with the : Sales budget Operating 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 13 / 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, direct material budget, production budget Production budget, direct material budget, revenue budget Production budget, revenue budget, direct material budget Revenue budget, production 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 ? Direct labor budget Cost of goods sold budget Manufacturing overhead budget Cash 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 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 Production volume, finished goods inventory, and sales volume Raw material inventory, work-in-process inventory, and production volume Raw material inventory, direct labor hours, and manufacturing overhead costs 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 16 / 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 a sales plan Determination of manufacturing capacity Development of the capital 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 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: Sales and ending inventory Production and cash flow Direct materials and cash flow 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 Which budget is prepared after the creation of the cash budget ? Capital expenditures budget Sales budget Budgeted balance sheet Production budget Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 19 / 20 The financial budget process includes : All of the answers are correct The capital budget The cash budget The budgeted statement of cash flows The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 20 / 20 After the goals of the company have been established and communicated, the next step in the planning process is development of the : Sales budget Selling and administrative budget Direct materials 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 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
