Question 1.1. Operating budgets and financial budgets

Question  1.1.  Operating budgets and financial budgets 

       have nothing to do with the master budget.

       are prepared after the master budget.

       combined, form the master budget.

       are prepared before the master budget.

Question  2.2. The time coverage of a budget should be 

       shorter rather than longer.

       cover design through manufacture and sale of the product.

       guided by the purpose of the budget.

       one year.

Question  3.3.  Financial budgets include the 

       administrative costs budget.

       capital expenditures budget.

       production budget.

       marketing costs budget.

Question  4.4.  A flexible budget 

       provides favorable operating results.

       is based on the budgeted level of output.

       is developed at the end of the period.

       is another name for management by exception.

Question  5.5.  A favorable variance indicates that 

       budgeted costs are less than actual costs.

       actual revenues exceed budgeted revenues.

       the actual amount decreased operating income relative to the budgeted amount.

       All of the above

Question  6.6.  When standards are used to develop a budget 

       flexible-budget amounts are difficult to determine.

       information is available at a low cost.

       past inefficiencies are excluded.

       benchmarking must also be used.

Question  7.7.  Variable overhead costs include 

       machine maintenance.

       depreciation on plant equipment.

       plant-leasing costs.

       the plant manager's salary.

Question  8.8.  Katie Enterprises reports the year-end information from 20X8 as follows: Sales (70,000 units) $560,000; Cost of goods sold 210,000; Gross margin 350,000; Operating expenses 200,000; Operating income $150,000.  Katie is developing the 20X2 budget.  In 20X2, the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%.  All other operating expenses are expected to remain constant.  Assume that COGS is a variable cost and that operating expenses are a fixed cost.  What is budgeted sales for 20X2? 

       $582,400

       $524,160     

       $504,000

       $560,000

Question  9.9.  Hester Company budgets on an annual basis for its fiscal year.  The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 20x2, through June 30, 20x3.

                                        July 1, 20x2                   June 30, 20x3

Raw material (note)               40,000                          10,000

Work in process                      8,000                            8,000  

Finished goods                       30,000                           5,000

(note) Three units of raw material are needed to produce each unit of finished product.

If Hester Company plans to sell 600,000 units during the 20x2-20x3 fiscal year, the number of units it would have to manufacture during the year would be   

       625,000.

       575,000.    

       540,000.

       640,000.

Question  10.10.  Information pertaining to Brenton Corporation's sales revenue is presented in the following table:

                                         February              March               April

           Cash Sales             $160,000             $150,000           $120,000

           Credit Sales             300,000               400,000             280,000

               Total Sales         $460,000             $550,000            $400,000

Management estimates that 5% of credit sales are not collectible.  Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale.  Cost of purchases of inventory each month are 70% of the next month's projected total sales.  ll purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Brenton's budgeted total cash receipts in March are

       $478,000.

       $457,000.

       $492,000.

       $428,000.