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 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 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 budget of a not-for-profit organization after it is approved by the appropriate authoritative body 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 2 / 20 Which one of the following items should be done first when developing a comprehensive budget for a manufacturing company ? Determination of the advertising budget Development of the capital budget Development of a sales 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 3 / 20 The master budget : Shows forecasted and actual results Contains the operating budget Reflects controllable costs only Can be used to determine manufacturing cost variances 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 4 / 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? Cost of goods sold plus or minus the change planned in finished goods Purchases, raw material, work-in-process, and finished goods Direct materials used, direct labor, manufacturing overhead, and work-in-process 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 5 / 20 Which of the following is normally included in the financial budget of a firm ? Sales budget Direct materials budget Selling expense 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 6 / 20 While an operating budget is a key element in planning and control, it is not likely to: Integrate organizational activities Provide subsidiary planning information Establish a commitment of company resources 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 7 / 20 The financial budget process includes : The capital budget The budgeted statement of cash flows The cash budget All of the answers are correct The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 8 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Pro forma income statement Ending inventory budget 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 9 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Cash management and working capital budget Strategic 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 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 availability of raw material without regard to inventory levels Expected change in the quantity of work-in-process inventories Expected change in the quantity of finished goods and raw material 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 11 / 20 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Manufacturing overhead budget Cost of goods sold budget Direct labor 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 12 / 20 The operating budget process usually begins with the : Financial budget Balance sheet Income statement Sales 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 All of the following are considered operating budgets except the : Materials budget Capital budget Sales budget Production 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 14 / 20 The starting point for creating a master budget for a proprietary secretarial school would be : Preparing a capital expenditure budget Preparing the student recruiting budget Estimating salaries of the instructors Forecasting enrollment 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 of the following is normally included in the operating budget ? Capital budget Budgeted balance sheet Cash budget Selling expense budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 16 / 20 The production budget process usually begins with the : Sales budget Direct materials 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 17 / 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 18 / 20 When preparing the series of annual operating budgets, management usually starts the process with the : Sales budget Balance sheet Cash 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 19 / 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 20 / 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 Production volume, finished goods inventory, and sales volume Direct labor hours, work-in-process inventory, and sales 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 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
