Operating Budget

When can the budgeted income statement be prepared?

After all components of the income statement have been completed

Why is a budgeted income statement prepared?

As part of controlling As a part of planning

Which of the following best describes operating expenses?

Both fixed and variable monthly expenses Selling and administrative expenses

Which of the following is included in the financial budget?

Cash budget

What is the last step before computing the budgeted income statement?

Computing the operating expenses Estimating the operating expenses Determining the operating expenses

What is the formula for computing the purchases budget?

Desired ending inventory + Current period sales - Beginning inventory

Which of the following expense is found in the operating budget?

Fixed

Which of the following is a consequence of an incorrect sales projection?

Inaccurate budgeted income statement Inaccurate inventory computations Incorrect cost of sales

On what does inventory needed to meet the sales projections are based?

Inventory already in stock Purchases required

Which parts of the operating budget cannot be forecasted until the projected sales are set?

Inventory required Operating expenses

What do budgets help managers to develop?

Overall business goals Strategies

Why is the sales budget (projection) so important?

Sales are needed to compute the other expenses. All other operating expenses flow from sales.

Which of the following is included in the operating budget?

Sales revenue

The "cornerstone" of the master budget is also known as __________.

The first part of the operating budget

What is the starting point for the master budget?

The sales projection The sales budget

What is the purpose of computing the desired ending inventory?

To determine purchases of goods to sell The company must maintain an inventory level to make sales The company cannot operate without To open the next month with inventory to sell

The budgeted cost of goods sold can be computed __________.

by first computing the sales budget then the percentage of sales as a percentage of sales

All other remaining components in the operating budget are __________ the sales revenue projections.

dependent upon prepared based on