CHAPTER 7:
Quiz/Demonstration Exercises
Learning Objective 2
1.
In order for budgets to be helpful in assisting an organization to accomplish
its objectives they _____.
a.
b.
c.
d.
2.
must be understood and accepted by the affected managers and
employees who may have participated in constructing the budgets
should have as its primary purpose the pointing out of managers'
failings
must come from the top of the organization with very little input
from lower-level managers and employees
must be unrealistic and vague
In order for budgets to be accepted by all the affected employees, the
following process should be used _____ budgeting.
a.
b.
c.
d.
participative
autocratic
authoritarian
socialist
Learning Objective 4
3.
Which of the following is not an important factor considered by sales
forecasters?
a.
b.
c.
d.
4.
market research studies
input from the human resources department
competitors' actions
changes in product mix
Different types of organizations face an important task that is similar to
sales forecasting. These organizations include _____.
a.
b.
c.
d.
e.
state government
federal government
charitable organization
university
all of the above
Learning Objective 5
5.
details the planned expenditures for facilities, equipment, new
products, and other long-term investments.
a.
b.
c.
d.
6.
The
summarizes the planned activities of all subunits of an
organization - sales, production, distribution, and finance - and is the
periodic business plan that includes a coordinated set of detailed operating
schedules and financial statements.
a.
b.
c.
d.
7.
master budget
sales budget
strategic plan
long-range plan
The _____ includes the sales budget, purchases budget, cost of goods sold
budget, operating expenses budget, and budgeted income statement, while
the _____ budget includes the capital budget, cash budget, and the
budgeted balance sheet.
a.
b.
c.
d.
8.
Capital budgeting
Strategic planning
Long-range planning
Master budgeting
financial budget; operating budget
operating budget; financial budget
strategic plan; financial budget
strategic plan; operating budget
_______ financial statements is another term for forecasted financial
statements.
a.
c.
d.
Long-range b.
Future-oriented
Estimated
Pro forma
Learning Objective 6
9.
The first step in the budgeting process is the preparation of the _____
budget.
a.
b.
c.
d.
10.
production
sales
operating expense
cash
Which of the following is usually prepared before the direct materials
purchases budget?
a.
b.
c.
d.
production budget
cash budget
operating expense budget
budgeted balance sheet
Learning Objective 7
11.
Root Company sells a product for $35. Budgeted sales for the first quarter
of 2002 are as follows:
January
February
March
$600,000
300,000
900,000
The company collects 70% in the month of sale and 25% in the following
month. Five percent of all sales are uncollectible and are written off.
Budgeted cash receipts for March are _____.
a.
b.
c.
d.
$600,000
$690,000
$900,000
$360,000
12.
Projected sales for Joshua, Inc., for next year and beginning and ending
inventory data:
Sales
Beginning Inventory
Targeted Ending. Inv.
60,000 units
12,000 units
30,000 units
The selling price is $20 per unit. Each unit requires 4 pounds of material,
which costs $5 per pound. The beginning inventory of raw materials is
7,000 pounds. The company wants to have 6,800 pounds of material in
inventory at the end of the year. Budgeted sales would be:
a.
b.
c.
d.
$840,000
$960,000
$1,120,000
$1,200,000
Use the following information for questions 13 through 15.
Projected sales for Frances Company for the next month and beginning and
ending inventory data are as follows:
Sales
Beginning inventory
Targeted ending inventory
40,000 units
3,000 units
7,000 units
The selling price is $20 per unit. Each unit requires 4 pounds of material,
which costs $5 per pound. The beginning inventory of raw material is
15,000 pounds. The company wants to have 20,000 pounds of material in
inventory at the end of the month.
13.
Budgeted sales would be _____.
a. $600,000
$880,000
14.
b. $720,000
c. $800,000
d.
According to the production budget, how many units should be produced?
a. 36,000 units
b. 40,000 units
c. 44,000 units
d. 50,000
units
15.
Pounds of material to be purchased would be _____.
a. 165,000 lbs.
b. 181,000 lbs.
c. 205,000 lbs.d. 245,000 lbs.
Learning Objective 8
16.
Which of the following is not a part of the financial budget?
a.
b.
c.
d.
capital budget
cash budget
budgeted balance sheet
budgeted income statement
17.
In constructing the cash budget, the finance section does not include
_____.
a.
b.
c.
d.
borrowing
repayments
collections from customers
interest payments
CHAPTER 7: Solutions to Quiz/Demonstration Exercises
1. [a]
2. [a]
3. [d]
4. [c]
5. [a]
6. [a]
7. [b]
8. [b]
9. [b]
10. [a]
11. [b]
The $690,000 expected cash receipts include $630,000, which
represents 70% of March's sales and $60,000 that is 25% of
February's purchases.
12. [d]
60,000 units x $20 sales price per unit.
13. [c]
Budgeted sales are 40,000 units x $20/unit selling price, which is
$800,000 in sales.
14. [c]
The units to be produced are found by adding the units expected to
be sold to the targeted ending inventory and then deducting the
beginning inventory as shown below:
Sales
+ Targeted ending inventory
= Total needed
- Beginning inventory
= Production needed
15. [b]
40,000 units
7,000 units
47,000 units
3,000 units
41,000 units
The number of pounds of material to be purchased is based on the
production needs, target ending inventory, and the inventory of
material already on hand. The computation appears below.
Materials needed for production
44,000 units
x 4 lbs./unit
176,000 lbs.
+ Desired ending inventory
20,000 lbs.
= Total material needs
196,000 lbs.
- Beginning inventory of material on hand 15,000 lbs.
= Pounds of material to be purchased
181,000 lbs.
16. [b] 17. [e]