topic 8 questions

Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. Production budget 2. Sales budget 3. Direct materials budget A) 2, 3, 1 B) 1, 3, 2 C) 3, 1, 2 D) 2, 1, 3

2, 1, 3

Loyal Pet Company expects to sell 6000 beefy dog treats in January and 10,000 in February for $2 each. What will be the total sales revenue reflected in the sales budget for those months? A) January $12,000; February $20,000 B) January $3000; February $5000 C) January $5000; February $3000 D) January $20,000; February $12,000

A) January $12,000; February $20,000

What is the starting point of the master budget process? A) sales budget B) cash budget C) budgeted income statement D) production budget

A) sales budget

Managers may intentionally build slack into the budget A) to gain the resources they need in the event of budget cuts B) to make their performance look worse C) because they are certain about the future D) to accomplish all of the above

A) to gain the resources they need in the event of budget cuts

When preparing a production budget, the required production equals: A) budgeted sales + beginning inventory + desired ending inventory B) budgeted sales − beginning inventory + desired ending inventory C) budgeted sales − beginning inventory − desired ending inventory D) budgeted sales + beginning inventory − desired ending inventory

B) budgeted sales − beginning inventory + desired ending inventory

Which of the following statements about budgeting is NOT true? A) budgeting is an aid to planning and control B) the operating budget should be prepared by top management, rather than mid-management personnel, because they have the overall objectives of the company in mind C) budgets help to coordinate the activities of the entire organization D) budgets promote communication and coordination between departments in an organization

B) the operating budget should be prepared by top management, rather than mid-management personnel, because they have the overall objectives of the company in mind

On the production budget, the number of units to be produced is computed as A) unit sales + desired end inventory + beginning inventory B) unit sales + desired end inventory - beginning inventory C) unit sales - desired end inventory - beginning inventory D) unit sales - desired end inventory + beginning inventory

B) unit sales + desired end inventory - beginning inventory

Which of the following budgets are prepared before the production budget? A) Direct Materials Budget: Yes, Sales Budget: Yes B) Direct Materials Budget: Yes, Sales Budget: No C) Direct Materials Budget: No, Sales Budget: Yes D) Direct Materials Budget: No, Sales Budget: No

C) Direct Materials Budget: No, Sales Budget: Yes

Which of the following is NOT an objective of the budgeting process? A) To communicate management's plans throughout the entire organization B) To provide a means of allocating resources to those parts of the organization where they can be used most effectively C) To ensure that the company continues to grow D) To uncover potential bottlenecks before they occur

C) To ensure that the company continues to grow

Budgets are used to accomplish all of the following tasks, except: A) planning for the future B) controlling operations C) recording actual results D) directing operations

C) recording actual results

Kotrick Company has beginning inventory of 17,000 units and expected sales of 21,000 units. If the desired ending inventory is 20,000 units, how many units should be produced? A) 18,000 B) 42,000 C) 16,000 D) 24,000

D) 24,000

Which of the following is a benefit to an organization that implements a budget? A) Budgets help managers focus their attention on the future needs in an organization. B) Budgets help managers improve their decision-making processes in an organization. C) Budgets help the manager improve the motivation of employees in the workplace. D) All of the above

D) All of the above

Most companies use _____ when the lower level management develops budgets each year. A) a top-down approach B) zero-based budgets C) slack-based budgets D) participative budgeting

D) participative budgeting