Multiple Choice Questions
1. The usual beginning point for a direct labor budget is the:
a. Material purchases budget
b. Sales budget
c. Production budget
d. Material purchases budget or the sales budget

2. Bell Corporation had the following purchases budgeted for the last six months of 2009:
July ............. $100,000
August ........... 80,000
September ......... 110,000
October .......... 90,000
November ......... 100,000
December ......... 94,000
Historically, the company has paid one half of a month’s purchases at the time of purchase and the remainder in the next month. If the company continues paying for purchases as it has in the past, what are the expected cash disbursements in November?
a. $95,000
b. $97,000
c. $100,000
d. $147,000

3. Which of the following is typically the first cash budget to be prepared?
a. Cash disbursements budget
b. Cash receipts budget
c. Summary cash budget
d. Cash usage budget

4. The cash paid as interest on long-term debt is shown in which of the following sections of a summary cash budget?
a. Operating activities section
b. Financing activities section
c. Investing activities section
d. Disbursing activities section

5. Budgeted financial statements:
a. Are required by GAAP
b. Are included in the set of audited financial statements
c. Are used by both internal and external users
d. All of the above

6. Which of the following statements regarding budgeting by merchandisers and manufacturers is true?
a. Merchandising companies will prepare a sales budget.
b. Manufacturing companies will not prepare budgets for production, direct material pur-chases, direct labor, or overhead.
c. Merchandising companies will prepare a direct material purchases budget.
d. All of the above are true.

7. Which of the following statements regarding nonfinancial budgets is true?
a. There is no such thing as a nonfinancial budget.
b. A nonfinancial budget may be more important than a financial (monetary) budget.
c. A nonfinancial budget is useful for the control function only.
d. Even nonfinancial budgets contain some monetary items.

8. In 2010, Clarence Company budgeted sales of 45,000 units, produced 44,600 units, and sold 44,500 units. Clarence’s 2010 flexible sales budget was based on _________ units.
a. 45,000
b. 44,600
c. 44,500
d. It cannot be determined from the information provided.