Chapter 7: Budgeting

cash collections schedule

schedule showing when cash will be received from customers

The most common budget is prepared for a ________. A. week B. month C. quarter D. year

D

What is the main difference between static and flexible budgets? A. The fixed manufacturing overhead is adjusted for units sold in the flexible budget. B. The variable manufacturing overhead is adjusted in the static budget. C. There is no difference between the budgets. D. The variable costs are adjusted in a flexible budget.

D

Which of the following is not a part of budgeting? A. planning B. finding bottlenecks C. providing performance evaluations D. preventing net operating losses

D

flexible budget

budget based on different levels of activity

direct labor budget

budget based on the production budget used to ensure the proper amount of staff is available for production and that there is money available to pay for the labor

direct materials budget

budget combining the production budget with the direct material per unit to ensure the proper quantity of direct materials is available when needed for production

manufacturing overhead budget

budget including the remainder of the production costs not covered by the direct materials and direct labor budgets

static budget

budget prepared for a single level of activity for a given period

sales budget

budget showing the expected sales in units and the sales price for the budget period

production budget

budget showing the number of units that need to be produced for each period based on sales estimates and required inventory levels

capital asset budget

budget showing the organization's plans to invest in long-term assets

selling and administrative expense budget

budget showing the variable and fixed expenses estimated to be incurred in all areas other than production

zero-based budgeting

budget that begins with zero dollars and then includes in the budget only revenue and expenses that can be supported or justified

rolling budget

budget that is continuously updated by adding an additional budget period at the end of the current budget period

operating budget

category of budgeting that helps managers plan and manage production, order materials, schedule direct labor, and monitor overhead expenses

cash budget

combined budget of all cash inflows and outflows of the organization

budgeted balance sheet

estimated assets, liabilities, and equities that the company would have at the end of the year if their performance were to meet its expectations

master budget

overall budget that includes the operating and financial budgets

budget

quantitative plan estimating when and how much cash or other resources will be received and how the cash or other resources will be used

cash payments schedule

schedule showing when cash will be used to pay for direct material purchases

budgeted income statement

statement similar to a traditional income statement except it contains budgeted data

Which approach is most likely to result in employee buy-in to the budget? A. top-down approach B. bottom-up approach C. total participation approach D. basing the budget on the prior year

B

The units required in production each period are computed by which of the following methods? A. adding budgeted sales to the desired ending inventory and subtracting beginning inventory B. adding beginning inventory, budgeted sales, and desired ending inventory C. adding beginning inventory to budgeted sales and subtracting desired ending inventory D. adding budgeted sales to the beginning inventory and subtracting the desired ending inventory.

A

Which budget is the starting point in preparing financial budgets? A. the budgeted income statement B. the budgeted balance sheet C. the capital expense budget D. the cash receipts budget

A

Which of the following is a finance budget? A. cash budget B. production budget C. direct materials purchasing budget D. tax budget

A

Which of the following is not an operating budget? A. sales budget B. production budget C. direct labor budget D. cash budget

D

Which approach requires management to justify all its expenditures? A. bottom-up approach B. zero-based budgeting C. master budgeting D. capital allocation budgeting

B

Which of the following is an operating budget? A. cash budget B. production budget C. tax budget D. capital budget

B

Which of the operating budgets is prepared first? A. production budget B. sales budget C. cash received budget D. cash payments budget

B

The cash budget is part of which category of budgets? A. sales budget B. cash payments budget C. financial budget D. operating budget

C

The direct materials budget is prepared using which budget's information? A. cash payments budget B. cash receipts budget C. production budget D. raw materials budget

C

Which budget evaluates the results of operations at the actual level of activity? A. capital budget B. cash budget C. flexible budget D. static budget

C

Which is not a section of the cash budget? A. cash receipts B. cash disbursements C. allowance for uncollectible accounts D. financing needs

C

Which of the following includes only financial budgets? A. capital asset budget, budgeted income statement, sales budget B. production budget, capital asset budget, budgeted balance sheet C. cash budget, budgeted balance sheet, capital asset budget D. budgeted income statement, direct material purchases budget, cash budget

C

Which of the following is true in a bottom-up budgeting approach? A. Every expense needs to be justified. B. Supervisors tell departments their budget amount and the departments are free to work within those amounts. C. Departments budget their needs however they see fit. D. Departments determine their needs and relate them to the overall goals.

C

Which of the following statements is not correct? A. The sales budget is computed by multiplying estimated sales by the sales price. B. The production budget begins with the sales estimated for each period. C. The direct materials budget begins with the sales estimated for each period. D. The sales budget is typically the first budget prepared.

C

financial budget

category of budgeting that details estimates for cash inflows and outflows through planned operations and changes capital investments of assets, liabilities, and equities