Chapter 8 - Master Budgeting
The sales forecast or sales budget
The usual starting point for a master budget is:
Continuous or perpetual budget
A 12 month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed is known as a
$6,000
Brockman company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $35,000. Budgeted cash disbursements are $123,000, while budgeted cash receipts are $130,000. Brockman company wants to have an ending cash balance of $48,000. How much would Brockman company need to borrow to achieve its desired ending cash balance?
False
Control involves developing goals and preparing various budgets to achieve those goals. True or False
False.
One of the weaknesses of budgets is that they are a little value in uncovering potential bottlenecks. True or false
The budget should be designed from the bottom up, with input from employees at all levels.
Regarding the budgeting process, which of the following statements is true? a. The budget should always be designed by top corporate management. b. The budget should be approved by the companies external auditors. c. The budget should be designed from the bottom up, with input from employees at all levels. d. All of the listed statements are true regarding the budgeting process.
production
The _____ budget is a part of the operating budgets.
True
The basic idea underlying responsibility accounting is that a manager should be held responsible for those items - and all those items - that the manager can actually control to a significant extent. True or false
Sales
The budgeting process begins with the preparation of the ______ budget.
$32,500 = 1300 x 25 = 32,500
The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Choose the correct answer from the options provided. Quarter First Second Third Fourth Total Sales 1,500 1,300 1,400 1,300 5,500 Percentage of sales collected in the quarter of the sale75% Percentage of sales collected in the quarter after the sale25% What is the amount of budgeted sales revenue for the fourth quarter?
$9,375 = 1500 * 25 * .25
The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Choose the correct answer from the options provided. Quarter First Second Third Fourth Total Sales 1,500 1,300 1,400 1,300 5,500 Percentage of sales collected in the quarter of the sale75% Percentage of sales collected in the quarter after the sale25% What is the amount of cash that is expected to be collected during the second quarter as a result of sales made during the first quarter?
$34,375 = 1400 * 25 *.75 = 26,250 + 1300 * 25 *.25 = 8,125
The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Choose the correct answer from the options provided. Quarter First Second Third Fourth Total Sales 1,500 1,300 1,400 1,300 5,500 Percentage of sales collected in the quarter of the sale75% Percentage of sales collected in the quarter after the sale25% What is the total amount of expected cash collections for the third quarter?
True
The master budget consists of a number of separate but interdependent budgets. True or false
Responsible Accounting
The system of accountability in which managers are held responsible for those items of revenue and costs—and only those items—over which they can exert significant control is referred to as ________.
Companies choose a span of one year to correspond to their fiscal years.
Which of the following explains why operating budgets generally span a period of one year? a. Accounting regulations mandate that all operating budgets be prepared for one year. b. Operating budgets, by definition, are prepared for one-year periods. c. Companies choose a span of one year to correspond to their fiscal years. d. Operating budgets need to correspond with the calendar year.
All of the above
Which of the following is a benefit of budgeting? a. Focuses managements attention on the future. b. Improved decision making processes. c. Improved motivation by employees. d. All of the above.
The budgeting process enables managers to uncover bottlenecks as they occur.
Which of the following is not a benefit of budgeting? a. The budgeting process enables managers to uncover bottlenecks as they occur. b. Budgets communicate management's plans throughout the organization. c. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance
Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations.
Which of the following is not a benefit of self-imposed budgets? a. A manager who is not able to meet a budget that has been imposed from above can always say that the budget was unrealistic and impossible to meet. b. Budget estimates prepared by front-line managers are often more accurate and reliable. c. Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations. d. Motivation is generally higher.
Self-imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process.
Which of the following is true of self-imposed (participative) budgets? a. Self-imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process. b. Self-imposed budgets are prepared without consulting lower-level managers. c. The estimates used in self-imposed budgets rely primarily on the inputs and insights of top managers. d. Managers who create self-imposed budgets do not have an opportunity to embed budgetary slack within their estimates
