Managerial Accounting QuizMaster Budget quiz 04/05/2026 1 min read 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 ? 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 2 / 20 Which of the following is normally included in the operating budget ? Cash budget Budgeted balance sheet Capital budget Selling expense budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 3 / 20 Which of the following is normally included in the financial budget of a firm ? Selling expense budget Budgeted balance sheet Direct materials 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 4 / 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 Development of a sales plan Determination of the advertising budget 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 5 / 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 6 / 20 The production budget process usually begins with the : Manufacturing overhead budget Direct materials budget Sales 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 7 / 20 When sales volume is seasonal in nature, certain items in the budget must be coordinated. The threemostsignificant items to coordinate in budgeting seasonal sales volume are : Raw material inventory, direct labor hours, and manufacturing overhead costs 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 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 8 / 20 While an operating budget is a key element in planning and control, it isnotlikely to: Provide subsidiary planning information Set out long-range, strategic concepts Establish a commitment of company resources Integrate organizational activities 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 9 / 20 The master budget : Can be used to determine manufacturing cost variances Reflects controllable costs only Shows forecasted and actual results 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 10 / 20 The master budget process usually begins with the : Financial budget Production budget Sales 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 11 / 20 After the goals of the company have been established and communicated, the next step in the planning process is development of the : Direct materials budget Sales budget Production budget Selling and administrative 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 12 / 20 Which one of the following items should be done first when developing a comprehensive budget for a manufacturing company ? Development of a sales budget Determination of the advertising budget Development of the capital 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 13 / 20 Which budget is prepared after the creation of the cash budget ? Production budget Capital expenditures budget Sales budget Budgeted balance sheet Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash budget 14 / 20 The budget that is usually themostdifficult to forecast is the : Sales budget Production budget Expense 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 15 / 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 16 / 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 The booklet containing budget guidelines, policies, and forms to use in the budgeting process 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 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 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 is calculated from the desired ending inventory and the sales forecast It includes required direct labor hours It summarizes all discretionary costs 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 The starting point for creating a master budget for a proprietary secretarial school would be : Preparing a capital expenditure budget Estimating salaries of the instructors Forecasting enrollment Preparing the student recruiting 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 19 / 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? Direct materials used, direct labor, manufacturing overhead, and work-in-process Purchases, raw material, work-in-process, and finished goods Cost of goods sold plus or minus the change planned in finished goods 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 20 / 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: Direct materials and cash flow Production volume and direct material Production and cash flow Sales and ending inventory 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 Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback 🚀 Join Telegram Group 📢 Telegram Channel 📘 Facebook Group 👍 Facebook Page 📌 Pinterest
