Managerial Accounting QuizMaster Budget quiz 04/06/2026 1 min read Master Budget 20 questions in 20 minutes Pass Score 70% The questions change when you repeat the exam 1 / 20 The production budget process usually begins with the : Direct materials budget Manufacturing overhead budget Direct labor budget Sales 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 2 / 20 Which of the following is normally included in the financial budget of a firm ? Selling expense budget Direct materials budget Budgeted balance sheet Sales budget The financial budget normally includes the capital budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows 3 / 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 4 / 20 When preparing the series of annual operating budgets, management usually starts the process with the : Cash budget Balance sheet Capital budget Sales 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 5 / 20 In preparing a corporate master budget, which one of the following ismostlikely to be prepared last ? Sales budget Production budget Cash 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 6 / 20 While an operating budget is a key element in planning and control, it isnotlikely to: Establish a commitment of company resources Set out long-range, strategic concepts Integrate organizational activities Provide subsidiary planning information 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 operating budget process usually begins with the : Financial budget Income statement Sales budget Balance sheet 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 8 / 20 Which one of the following may be considered an independent item in the preparation of the master budget? Capital investment budget Pro forma statement of financial position Ending inventory budget Pro forma income statement 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 Which budget is prepared after the creation of the cash budget ? Capital expenditures budget Sales budget Production budget Budgeted balance sheet Budgeted financial statements, more specifically the budgeted balance sheet, are prepared after the creation of the cash 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 Direct labor budget Cash 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 11 / 20 The budget that is usually themostdifficult 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 12 / 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 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 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 13 / 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 14 / 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 and cash flow Direct materials and cash flow Production volume and direct material 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 15 / 20 The master budget : Shows forecasted and actual results Can be used to determine manufacturing cost variances Contains the operating budget Reflects controllable costs only 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 16 / 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 work-in-process inventories Expected change in the quantity of finished goods and 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 17 / 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 : Schedule of cash receipts and disbursements Sales forecast Production budget Raw materials purchases 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 18 / 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 Preparation of a pro forma income statement Development of the capital budget Determination of the advertising 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 19 / 20 Which of the following is normally included in the operating budget ? Selling expense budget Budgeted balance sheet Cash budget Capital budget An operating budget normally includes sales, production, selling and administrative, and budgeted income statement components 20 / 20 The foundation of a profit plan is the : Capital budget Cost and expense budget Sales forecast Production plan 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 Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback 🚀 Join Telegram Group 📢 Telegram Channel 📘 Facebook Group 👍 Facebook Page 📌 Pinterest
