FINANCIAL MANAGEMENT QUIZ
S1: The direct materials to be purchased for a period can be obtained by subtracting the
desired ending inventory of direct materials from the total direct materials needed for the
period.
S2: The direct labor budget begins with sales in units from the sales budget.
S3: In the manufacturing overhead budget, the non-cash charges (such as depreciation) are
deducted from the total budgeted manufacturing overhead to determine the expected cash
disbursements for manufacturing overhead.
A.
B.
C.
D.
One statement is correct.
Two statements are correct.
All statements are correct.
None of the statements is correct.
Betz Company's sales budget shows the following projections for next year:
Sales in units
First Quarter 60,000
Second Quarter 80,000
Third Quarter 45,000
Fourth Quarter 55,000
Inventory at the beginning of the year was 18,000 units. The finished goods inventory at the
end of each quarter is to equal 30% of the next quarter's budgeted unit sales. How many
units should be produced during the first quarter?
A) 24,000
B) 48,000
C) 66,000
D) 72,000
Units produced = Ending inventory + Units sold + Beginning inventory
= (30% × 80,000) + 60,000 − 18,000
= 24,000 + 60,000 − 18,000 = 66,000
The master budget is a static budget because it
a. is geared to only one level of production and sales.
b. never changes from one year to the next.
c. covers a preset period of time.
d. always contains the same operating and financial budgets.
The following information has been gathered by the Budget Director of the Kareton
Company, another outfit managed by the Masugid Company. The firm manufactures and
sells only one product. The selling price during the coming month is expected to be the
prevailing price of P5 per unit. Expected sales during the month is a total of 75,000 units of
finished goods. Finished goods expected to be on hand at the end of the month total 50,000
units. Finished goods expected to be on hand at the beginning of the month total 42,000
units. Direct labor cost is P3.00 per hour. One-fourth an hour of direct labor is required to
manufacture each unit of finished product. Factory overhead is applied to work-in-process
on the basis of direct labor hours. Variable factory expenses at the planned level of
operations is expected to amount to P33,200; fixed overhead is expected to amount to
P99,600. The raw materials expected to be on hand at the beginning of the month total
5,000 gallons. Only one kind of raw material is used to produce the finished goods. One
and one-half gallons of raw material are needed to manufacture each unit of finished
product. Raw materials are expected to cost P0.18 per gallon during the coming month, its
prevailing cost. Raw materials expected to be on hand at the end of the month total 8,000
gallons. Variable administrative and selling expenses is P1.00 per unit. In assisting the
company to formulate the budget, you determined the following budget parameters.
Fixed overhead cost per direct labor hour is
a. P1.60
b. P4.80
c. P1.80
d. P6.40
Budgeting expenditures by purpose is called
a. Program budgeting.
c. Line budgeting.
b. Zero-based budgeting.
d. Flexible budgeting.
The following information has been gathered by the Budget Director of the Kareton
Company, another outfit managed by the Masugid Company. The firm manufactures and
sells only one product. The selling price during the coming month is expected to be the
prevailing price of P5 per unit. Expected sales during the month is a total of 75,000 units of
finished goods. Finished goods expected to be on hand at the end of the month total 50,000
units. Finished goods expected to be on hand at the beginning of the month total 42,000
units. Direct labor cost is P3.00 per hour. One-fourth an hour of direct labor is required to
manufacture each unit of finished product. Factory overhead is applied to work-in-process
on the basis of direct labor hours. Variable factory expenses at the planned level of
operations is expected to amount to P33,200; fixed overhead is expected to amount to
P99,600. The raw materials expected to be on hand at the beginning of the month total
5,000 gallons. Only one kind of raw material is used to produce the finished goods. One
and one-half gallons of raw material are needed to manufacture each unit of finished
product. Raw materials are expected to cost P0.18 per gallon during the coming month, its
prevailing cost. Raw materials expected to be on hand at the end of the month total 8,000
gallons. Variable administrative and selling expenses is P1.00 per unit.
In assisting the company to formulate the budget, you determined the following budget
parameters.
Budgeted raw materials purchases cost is
a. P22,950
b. P22,410
c. P23,760
d. P124,500
S1: The usual starting point in budgeting is to make a forecast of net income
S2: A continuous or perpetual budget is one which covers a 12-month period but which is
constantly adding a new month on the end as the current month is completed.
S3: A self-imposed budget is one prepared by top management and passed downward
through an organization
A. One statement is correct.
B. Two statements are correct.
C. All statements are correct.
D. None of the statements is correct.
Diego makes all purchases on account, subject to the following payment pattern:
Paid in the month of purchase: 30%
Paid in the first month following purchase: 60%
Paid in the second month following purchase: 10%
If purchases for January, February, and March were P200,000, P180,000, and P230,000,
respectively, what were the firm's budgeted payments in March?
A. P69,000.
B. P138,000.
C. P177,000.
D. P197,000.
If cash receipts from customers are greater than sales, which of the following is most likely
to be true?
A. Accounts receivable will decrease.
B. Cash balance will increase.
C. Outstanding debt will decrease.
D. The company will show a profit.
For better management acceptance, the flow of data to be used for budgeting should begin
with
a. Accounting department
b. Lower levels of management
c. Top management
d. Budget committee
The following information has been gathered by the Budget Director of the Kareton
Company, another outfit managed by the Masugid Company. The firm manufactures and
sells only one product. The selling price during the coming month is expected to be the
prevailing price of P5 per unit. Expected sales during the month is a total of 75,000 units of
finished goods. Finished goods expected to be on hand at the end of the month total 50,000
units. Finished goods expected to be on hand at the beginning of the month total 42,000
units. Direct labor cost is P3.00 per hour. One-fourth an hour of direct labor is required to
manufacture each unit of finished product. Factory overhead is applied to work-in-process
on the basis of direct labor hours. Variable factory expenses at the planned level of
operations is expected to amount to P33,200; fixed overhead is expected to amount to
P99,600. The raw materials expected to be on hand at the beginning of the month total
5,000 gallons. Only one kind of raw material is used to produce the finished goods. One
and one-half gallons of raw material are needed to manufacture each unit of finished
product. Raw materials are expected to cost P0.18 per gallon during the coming month, its
prevailing cost. Raw materials expected to be on hand at the end of the month total 8,000
gallons.
Variable administrative and selling expenses is P1.00 per unit.
In assisting the company to formulate the budget, you determined the following budget
parameters.
Budgeted cost of raw materials to be used in production is
a. P124,500
b. P14,940
c. P8,910
d. P22,410
Brooklyn makes all purchases on account, subject to the following payment pattern:
Paid in the month of purchase: 30%
Paid in the first month following purchase: 65%
Paid in the second month following purchase: 5%
If purchases for April, May, and June were P200,000, P160,000, and P250,000, respectively,
what was the firm's budgeted payables balance on June 30?
A. P175,000.
B. P179,000.
C. P183,000.
D. P189,000.
These statements are proper to the budgeting process except:
a. It is a part of management’s responsibility to plan the use of its resources.
b. It is a tool to orchestrate the various functions of operations in a business.
c. The involvement of the various levels of individuals in the company is necessary to gain its
acceptance and attain its goals.
d. Actual results need not be compared with plan, since the process ends after budget is
approved.
Which of the following statements is True?
a. Under zero-based budgeting, a manager is required to start at zero budget levels each period,
as if the programs involved were being initiated for the first time.
b. The primary purpose of the cash budget is to show the expected cash balance at the end of
the budget period.
c. Budget data are generally prepared by top management and distributed downward in an
organization.
d. The budget committee is responsible for preparing detailed budget figures in an organization.
Vern's makes all sales on account, subject to the following collection pattern: 20% are
collected in the month of sale; 70% are collected in the first month after sale; and 10% are
collected in the second month after sale. If sales for October, November, and December
were P70,000, P60,000, and P50,000, respectively, what was the budgeted receivables
balance on December 31?
A. P40,000.
B. P46,000.
C. P49,000.
D. P59,000.
Which of the following is most likely to result if X’s managers decide to reduce inventory to
alleviate a cash deficiency shown in its initial cash budget?
a. A decrease in X’s cost-of-sales percentage.
b. A decrease in X’s budgeted purchases.
c. A lowering of X’s credit rating.
d. A longer collection period for X’s credit sales.
Budgeting expenditures by purpose is called
a. Program budgeting.
c. Line budgeting.
b. Zero-based budgeting. d. Flexible budgeting.
MNO Corporation has a P35,000 balance of account receivable at the beginning of its
budget period. It has budgeted P160,000 credit sales and expects to collect 70% of these
during the budget period.
What is the ending balance of accounts receivable assuming that all but 10% of the
beginning balance is collected during the budget period.
a. P 3,560
b. P51,500
c. P71,500
d. P143,500
Which of the following is not an "operating" budget?
a. sales budget
b. production budget
c. purchases budget
d. capital budget
For better management acceptance, the flow of data to be used for budgeting should begin
with
A. Accounting department
B. Lower levels of management
C. Top management
D. Budget committee
On budgeting, all of the following are not valid, except
a. Responsibility budget identifies revenue and costs with the individual responsible for their
incurrence.
b. The best way to establish budget figures is to use last year’s actual cost and activity data as
this year’s budget estimates.
c. A sales budget and a sales forecast are the same thing.
d. The primary purpose of the cash budget is to show the expected cash balance at the end of
the budget period.
S1: Cash collections in a schedule of cash collections typically consist of collections on sales
made to customers in prior periods plus collections on sales made in the current budget
period.
S2: In a production budget, if the number of units in finished goods inventory at the end of
the period is less than the number of units in finished goods inventory at the beginning of
the period, then the expected number of units sold is greater than the number of units to be
produced during the period.
S3: In a merchandising company, the required merchandise purchases for a period are
determined by subtracting the units in beginning inventory from the sum of the units to be
sold during the period and the desired ending inventory.
A. One statement is correct.
B. Two statements are correct.
C. All statements are correct.
D. None of the statements is correct.
On budgeting, all of the following are not valid, except
a. Responsibility budget identifies revenue and costs with the individual responsible for their
incurrence.
b. The best way to establish budget figures is to use last year’s actual cost and activity data as
this year’s budget estimates.
c. A sales budget and a sales forecast are the same thing.
d. The primary purpose of the cash budget is to show the expected cash balance at the end of
the budget period.
For better management acceptance, the flow of data to be used for budgeting should begin
with
a. Accounting department
c. Lower levels of management
b. Top management
d. Budget committee
Which of the following objectives is not a primary purpose of preparing a budget?
a. To provide a basis for comparison of actual performance
b. To communicate the company’s plans throughout the entire business organization
c. To control income and expenditure in a given period.
d. To make sure the company expands its operations.
Schuepfer Inc. bases its selling and administrative expense budget on budgeted unit sales.
The sales budget shows 1,300 units are planned to be sold in March. The variable selling
and administrative expense is P4.20 per unit. The budgeted fixed selling and administrative
expense is P19,240 per month, which includes depreciation of P3,380 per month. The
remainder of the fixed selling and administrative expense represents current cash flows.
The cash disbursements for selling and administrative expenses on the March selling and
administrative expense budget should be:
A) P15,860
B) P5,460
C) P24,700
D) P21,320
The following information has been gathered by the Budget Director of the Kareton
Company, another outfit managed by the Masugid Company. The firm manufactures and
sells only one product. The selling price during the coming month is expected to be the
prevailing price of P5 per unit. Expected sales during the month is a total of 75,000 units of
finished goods. Finished goods expected to be on hand at the end of the month total 50,000
units. Finished goods expected to be on hand at the beginning of the month total 42,000
units. Direct labor cost is P3.00 per hour. One-fourth an hour of direct labor is required to
manufacture each unit of finished product. Factory overhead is applied to work-in-process
on the basis of direct labor hours. Variable factory expenses at the planned level of
operations is expected to amount to P33,200; fixed overhead is expected to amount to
P99,600. The raw materials expected to be on hand at the beginning of the month total
5,000 gallons. Only one kind of raw material is used to produce the finished goods. One
and one-half gallons of raw material are needed to manufacture each unit of finished
product. Raw materials are expected to cost P0.18 per gallon during the coming month, its
prevailing cost. Raw materials expected to be on hand at the end of the month total 8,000
gallons.
Variable administrative and selling expenses is P1.00 per unit.
In assisting the company to formulate the budget, you determined the following budget
parameters.
Budgeted direct labor is
a. P20,750
b. P83,000
c. P62,250
d. P33,200
The primary reason that managers impose a minimum cash balance in the cash budget is
a. because management needs discretionary cash for unforeseen business opportunities.
b. managers lack discipline to control their spending.
c. that it protects the organization from the uncertainty of the budgeting process.
d. that it makes the financial statements look more appealing to creditors.
When actual performance varies from the budgeted performance, managers will be more
likely to revise future budgets if the variances were
a. controllable rather than uncontrollable.
b. uncontrollable rather than controllable.
c. favorable rather than unfavorable.
d. small.
Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance
is P35,000. Budgeted cash receipts total P142,000 and budgeted cash disbursements total
P151,000. The desired ending cash balance is P30,000. To attain its desired ending cash
balance for March, the company needs to borrow:
a) P0
B) P4,000
C) P56,000
D) P30,000
The usual starting point for a master budget is:
A) the direct materials purchase budget.
B) the budgeted income statement.
C) the sales forecast or sales budget.
D) the production budget.
Which of the following organizations is not likely to use budgets?
A. Merchandising firms.
B. Firms in service industries.
C. Nonprofit organizations.
D. None of the above, as all are likely to use budgets.
Which of the following statements is true?
a. All organizations have the same set of budgets.
b. All organizations are required to budget.
c. Budgets are a quantitative expression of an organization's goals and objectives.
d. Budgets should never be used to evaluate performance.
The cash budget for 20x2 would be affected in some way by all of the following EXCEPT
a. A cash dividend declared in 20x1 for payment in 20x2.
b. A cash dividend declared in 20x2 for payment in 20x3.
c. Interest expense on loans taken out and repaid during 20x2.
d. The sales forecast for the first month in 20x3.
These statements are proper to the budgeting process except:
a. It is a part of management’s responsibility to plan the use of its resources.
b. It is a tool to orchestrate the various functions of operations in a business.
c. The involvement of the various levels of individuals in the company is necessary to gain its
acceptance and attain its goals.
d. Actual results need not be compared with plan, since the process ends after budget is
approved.
When preparing a merchandise purchases budget, the required purchases in units equals:
A) budgeted unit sales + beginning merchandise inventory + desired merchandise ending
inventory.
B) budgeted unit sales - beginning merchandise inventory + desired merchandise ending
inventory.
C) budgeted unit sales - beginning merchandise inventory - desired merchandise ending
inventory.
D) budgeted unit sales + beginning merchandise inventory - desired merchandise ending
inventory.
If operating expenses are paid in the month incurred and include monthly depreciation
charges of P2,500, determine the change in Wolfe's cash balance during February.
A. P2,000 increase.
B. P4,500 increase.
C. P5,000 increase.
D. P7,500 increase.
In preparing its budget for July, 1997, Joy Company has the following accounts receivable
information available:
Accounts receivable at June 30, 19x7 P350,000
Estimated credit sales for July P400,000
Estimated collections in July for credit sales in July and prior months P320,000
Estimated write-offs in July for uncollectible credit sales P 16,000
Estimated provision for doubtful accounts for credit sales in July P 12,000
What is the projected balance of accounts receivable at July 31, 19x7?
a. P402,000.
b. P430,000.
c. P414,000.
d. P426,000.
Ineffective budgets and/or control systems are characterized by the use of
a. budgets as a planning tool only and disregarding them for control purposes.
b. budgets for motivation.
c. budgets for coordination.
d. the budget for communication.
A budget that is expressed in units of materials, number of employees, or number of manhours or service units rather than in pesos is known as
a. Planning budget
b. Progressive budget
c. Physical budget
d. Traditional budget
Budget slack is a condition in which
a. demand is low at various times of the year.
b. excess machine capacity exists in some areas of the plant.
c. there is an intentional overestimate of expenses or an underestimate of revenues.
d. managers grant favored employees extra time off.
A company that maintains a raw material inventory, which is based on the following
month's production needs, will purchase less material than it uses in a month where
a. sales exceed production.
b. production exceeds sales.
c. planned production exceeds the next month's planned production.
d. planned production is less than the next month's planned production.
Sedita Inc. is working on its cash budget for July. The budgeted beginning cash balance is
P46,000. Budgeted cash receipts total P175,000 and budgeted cash disbursements total
P174,000. The desired ending cash balance is P50,000. The excess (deficiency) of cash
available over disbursements for July will be:
A) P47,000
B) P221,000
C) P45,000
D) P1,000
A financing gap occurs when
a. Required assets exceed available equities.
b. The budgeted cash balance goes below the minimum required balance.
c. Budgeted cash receipts are less than budgeted cash disbursements.
d. Any of the above occurs.
In budgeting, which of the following statements is false?
a. Budgeting provides a measuring device to which subsequent performances are compared and
evaluated.
b. Planning and control are the essential features of the budgeting process
c. Budget preparation is not the sole responsibility of any one department and is prepared by
combining the efforts of many individuals
d. Capital expenditures budget shows the availability of idle cash for investment
The budgeted income statement, budgeted balance sheet, and budgeted statement of cash
flows comprise:
A. the final portion of the master budget.
B. the depiction of an organization's overall actual financial results.
C. the first step of the master budget.
D. the portion of the master budget prepared after the sales forecast and before the remainder of
the operational budgets.