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 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Direct labor budget Cash budget Manufacturing overhead 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 2 / 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 Schedule of cash receipts and disbursements 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 3 / 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 the advertising 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 4 / 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 5 / 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 6 / 20 All of the following are considered operating budgets except the : Production budget Materials budget Sales budget Capital 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 7 / 20 The budget that is usually the most difficult to forecast is the : Expense budget Sales budget Manufacturing overhead 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 8 / 20 Which budget is prepared after the creation of the cash budget ? Production budget Budgeted balance sheet Capital expenditures budget Sales budget Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 9 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Strategic budget Cash management and working capital budget Capital investment budget Production 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 10 / 20 The production budget process usually begins with the : Manufacturing overhead budget Sales budget Direct materials 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 11 / 20 Which of the following is normally included in the financial budget of a firm ? Direct materials budget Selling expense 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 12 / 20 The starting point for creating a master budget for a proprietary secretarial school would be : Preparing the student recruiting budget Estimating salaries of the instructors 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 13 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Pro forma income statement Pro forma statement of financial position Ending inventory budget 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 14 / 20 The master budget : Shows forecasted and actual results Can be used to determine manufacturing cost variances Reflects controllable costs only Contains the operating budget 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 15 / 20 Which of the following is normally included in the operating budget ? Budgeted balance sheet Cash budget Capital budget Selling expense budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 16 / 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 Sales 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 17 / 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 18 / 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 19 / 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 20 / 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 Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback Follow the Facebook page Accountants Quiz and join the group Accounting Quiz 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
