Master Budget quiz Managerial Accounting Quiz 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 items is the last schedule to be prepared in the normal budget preparation process ? Cost of goods sold budget Manufacturing overhead budget Selling expense budget Cash 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 2 / 20 The budget that is usually themostdifficult 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 3 / 20 The budget that is usually themostdifficult to forecast is the : Expense budget Manufacturing overhead budget Production 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 4 / 20 The master budget : Can be used to determine manufacturing cost variances Reflects controllable costs only Contains the operating budget Shows forecasted and actual results 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 5 / 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 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 6 / 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 7 / 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, direct labor, manufacturing overhead, finished goods, and work-inprocess Direct materials used, direct labor, manufacturing overhead, and work-in-process 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 8 / 20 In developing a comprehensive budget for a manufacturing company, which one of the following items should be done first ? Development of a sales plan Determination of manufacturing capacity Development of the capital budget 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 9 / 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 twomostsignificant items that will be affected are: Production volume and direct material Direct materials and cash flow Sales and ending inventory Production and cash flow 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 10 / 20 Which budget is prepared after the creation of the cash budget ? Production budget Sales budget Budgeted balance sheet Capital expenditures budget Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 11 / 20 All of the following are considered operating budgetsexceptthe : Sales budget Materials budget Production 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 12 / 20 Which of the following is normally included in the operating budget ? Cash budget Selling expense budget Capital budget Budgeted balance sheet An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 13 / 20 The master budget process usually begins with the : Production budget Sales budget Financial budget Operating 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 14 / 20 In an organization that plans by using comprehensive budgeting, the master budget is : 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 The current budget updated for operations for part of the current year 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 15 / 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 16 / 20 Which one of the following schedules would be the last item to be prepared in the normal budget preparation process ? Cash budget Cost of goods sold budget Direct labor budget Manufacturing overhead 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 17 / 20 There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the followingbestdescribes the production budget ? It includes required material purchases It summarizes all discretionary costs It is calculated from the desired ending inventory and the sales forecast It includes required direct labor hours 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 18 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Pro forma income statement Capital investment budget Ending inventory budget 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 19 / 20 The preparation of a comprehensive master budget culminates with the preparation of the : Capital investment budget Cash management and working capital budget Strategic 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 20 / 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 Preparation of a pro forma income statement Development of the capital budget Development of a sales budget 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 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
