Question 1

The nature of planning changes with the length of the time period being considered. Generally, the shorter the time period, the more general the plans.

Accepted Answer

A) True 
 B)False

Question 2

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

Accepted Answer

A)   Performance measurement
B)   Coordination
C)   Planning
D)   Corrective actionE) All of the above
F) A) and D)

Question 3

The pro forma income statement gives managers an advance estimate of a company's profitability.

Accepted Answer

A) True 
 B)False

Question 4

If a budgeting system is designed correctly, top management will not have to get involved in the process.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not an advantage of budgeting?

Accepted Answer

A)   Provides assurance that accounting records are in accordance with generally accepted accounting principles.
B)   Forces coordination among departments to promote decisions in the best interests of the company as a whole.
C)   Provides advance notice of potential shortages, bottlenecks, or other weaknesses in operating plans.
D)   Provides a way to evaluate performance.E) All of the above
F) C) and D)

Question 6

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Accepted Answer

A)   Depreciation expense
B)   Administrative salaries
C)   Advertising expense
D)   Both administrative salaries and advertising expense are correct.E) A) and B)
F) A) and D)

Question 7

Barnes Company expects to begin operating on January 1. The company's master budget contained the following operating expense budget:  Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of accumulated depreciation appearing on the company's March 31 pro forma balance sheet is:

Accepted Answer

A)   $1,000.
B)   $2,000.
C)   $3,000.
D)   $12,000.E) A) and B)
F) A) and C)

Question 8

The cash budget is not the same as the pro forma cash flow statement.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would be prepared first when a merchandising company uses a master budget?

Accepted Answer

A)   Selling and administrative expense budget
B)   Budgeted income statement
C)   Sales forecast
D)   Inventory purchases budgetE) A) and D)
F) All of the above

Question 10

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Accepted Answer

A)   Expected unit selling price
B)   Beginning inventory
C)   Expected unit sales
D)   Desired ending inventoryE) A) and B)
F) A) and C)

Question 11

Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following items would be least useful in preparing a schedule of cash receipts?

Accepted Answer

A)   Expected revenue from cash sales.
B)   Number of units expected to be purchased.
C)   Service charges for credit card sales.
D)   Past accounts receivable collection experience.E) A) and B)
F) A) and C)

Question 13

In a participative budgeting system, budget information flows in both directions, from bottom to top, and from top to bottom.

Accepted Answer

A) True 
 B)False

Question 14

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2  Based on the company's collection history, 42% of credit sales are collected in month of sale and the remainder is collected in the following month. Cash collections in January from December credit sales would be:

Accepted Answer

A)   $69,600.
B)   $81,200.
C)   $72,000.
D)   $84,000.E) A) and D)
F) B) and C)

Question 15

Select the correct equation format for the purchases budget.

Accepted Answer

A)   Beginning inventory + expected sales = required purchases.
B)   Cost of budgeted sales + beginning inventory - desired ending inventory = required purchases.
C)   Beginning inventory + expected sales - desired ending inventory = required purchases.
D)   Cost of budgeted sales + desired ending inventory - beginning inventory = required purchases.E) A) and B)
F) A) and C)

Question 16

Although only 20 units are on hand at the beginning of the year, World Company plans to sell 100 units during Year 2. Assuming the company desires an ending inventory of 10 units, it should plan to purchase 110 units.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not considered a pro forma financial statement?

Accepted Answer

A)   Sales budget
B)   Balance sheet
C)   Cash flow statement
D)   Income statementE) A) and B)
F) A) and D)

Exam 14: Planning for Profit and Cost Control

Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement.

Correct Answer
verified

The cash budget is not the same as the pro forma cash flow statement.

Correct Answer
verified

The pro forma income statement gives managers an advance estimate of a company's profitability.

Correct Answer
verified

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Correct Answer
verified

If a budgeting system is designed correctly, top management will not have to get involved in the process.

Correct Answer
verified

Which of the following is not an advantage of budgeting?

Correct Answer
verified

Which of the following is not considered a pro forma financial statement?

Correct Answer
verified

In a participative budgeting system, budget information flows in both directions, from bottom to top, and from top to bottom.

Correct Answer
verified

Although only 20 units are on hand at the beginning of the year, World Company plans to sell 100 units during Year 2. Assuming the company desires an ending inventory of 10 units, it should plan to purchase 110 units.

Correct Answer
verified

Which of the following items would be least useful in preparing a schedule of cash receipts?

Correct Answer
verified

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

Correct Answer
verified

Which of the following would be prepared first when a merchandising company uses a master budget?

Correct Answer
verified

Correct Answer
verified

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Correct Answer
verified

Select the correct equation format for the purchases budget.

Correct Answer
verified

Correct Answer
verified

The nature of planning changes with the length of the time period being considered. Generally, the shorter the time period, the more general the plans.

Correct Answer
verified

Exam 14: Planning for Profit and Cost Control

Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement.

Correct AnswerverifiedShow Answer

The cash budget is not the same as the pro forma cash flow statement.

Correct AnswerverifiedShow Answer

The pro forma income statement gives managers an advance estimate of a company's profitability.

Correct AnswerverifiedShow Answer

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Correct AnswerverifiedShow Answer

If a budgeting system is designed correctly, top management will not have to get involved in the process.

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of budgeting?

Correct AnswerverifiedShow Answer

Which of the following is not considered a pro forma financial statement?

Correct AnswerverifiedShow Answer

In a participative budgeting system, budget information flows in both directions, from bottom to top, and from top to bottom.

Correct AnswerverifiedShow Answer

Although only 20 units are on hand at the beginning of the year, World Company plans to sell 100 units during Year 2. Assuming the company desires an ending inventory of 10 units, it should plan to purchase 110 units.

Correct AnswerverifiedShow Answer

Which of the following items would be least useful in preparing a schedule of cash receipts?

Correct AnswerverifiedShow Answer

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

Correct AnswerverifiedShow Answer

Which of the following would be prepared first when a merchandising company uses a master budget?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Correct AnswerverifiedShow Answer

Select the correct equation format for the purchases budget.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The nature of planning changes with the length of the time period being considered. Generally, the shorter the time period, the more general the plans.

Correct AnswerverifiedShow Answer

Correct Answer
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