Master Budget quiz Managerial Accounting Quiz On Mar 12, 2024 Share /20 1234567891011121314151617181920 Master Budget 20 questions in 20 minutes Answers at the end of the exam Pass Score 70% The questions change when you repeat the exam enter full-screen mode by pressing the icon located in the top- right comer of the exam 1 / 20 When preparing the series of annual operating budgets, management usually starts the process with the : Sales budget Cash budget Capital budget Balance sheet 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 Which one of the following items is the last schedule to be prepared in the normal budget preparation process ? Cash budget Cost of goods sold budget Selling expense 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 3 / 20 There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the following best describes the production budget ? It includes required material purchases It summarizes all discretionary costs It includes required direct labor hours It is calculated from the desired ending inventory and the sales forecast 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 4 / 20 The budget that is usually the most difficult to forecast is the : Expense budget Production budget Sales budget Manufacturing overhead 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 5 / 20 After the goals of the company have been established and communicated, the next step in the planning process is development of the : Production budget Sales budget Selling and administrative budget Direct materials 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 6 / 20 Which one of the following best describes the order in which budgets should be prepared when developing the annual master operating budget ? Production budget, revenue budget, direct material budget Revenue budget, production 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 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 finished goods and work-in-process inventories Expected change in the quantity of 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 foundation of a profit plan is the : Sales forecast Production plan Capital budget Cost and expense 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 The preparation of a comprehensive master budget culminates with the preparation of the : Cash management and working capital budget Capital investment 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 10 / 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 Cash budget Direct labor 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 11 / 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 Sales and ending inventory Production 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 12 / 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 13 / 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? Purchases, direct labor, manufacturing overhead, finished goods, and work-inprocess Purchases, raw material, work-in-process, and finished goods Direct materials used, direct labor, manufacturing overhead, and work-in-process Cost of goods sold plus or minus the change planned in 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 14 / 20 Which budget is prepared after the creation of the cash budget ? Sales budget Budgeted balance sheet Capital expenditures budget Production budget Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 15 / 20 The budget that is usually the most difficult to forecast is the : Sales budget Expense budget Production budget Manufacturing overhead 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 16 / 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 17 / 20 The operating budget process usually begins with the : Sales budget Balance sheet Financial budget 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 18 / 20 Which of the following is normally included in the operating budget ? Selling expense budget Budgeted balance sheet Capital budget Cash budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 19 / 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 Capital investment 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 20 / 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 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