1. The cash budget is usually prepared after the budgeted income statement. True False

2. The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together. True False

3. In business, a budget is a method for putting a limit on spending. True False

4. The first budget a company prepares in a master budget is the production budget. True False

5. The manufacturing overhead budget lists all costs of production other than selling and administrative expenses. True False

6. On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment. True False

7. Which of the following budgets are prepared before the production budget?

Direct MNaterials Budget Sales Budget

A) YES YES

B) YES NO

C) NO YES

D) NO NO

Option A

Option B

Option C

Option D

8. All the following are considered to be benefits of participative budgeting, except for:

Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization.

The budget estimates are prepared by those in directly involved in activities.

When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.

Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.

9. Parsons Corporation plans to sell 18,000 units during August. If the company has 5,500 units on hand at the start of the month, and plans to have 6,000 units on hand at the end of the month, how many units must be produced during the month?

24,000

18,500

19,500

17,500

10. Richards Corporation has the following budgeted sales for the first half of next year:

Cash Sales Credit Sales

January $80,000 $350,000

February $60,000 $200,000

March $50,000 $145,000

April $45,000 $130,000

May $55,000 $170,000

June $50,000 $150,000

The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:

Collections on Credit Sales:

60% inmonth of sale

30% in month following sales

10% in second month following sale

The accounts receivable balance on January 1 is $70,000. Of this amount, $60,000 represents uncollected December sales and $10,000 represents uncollected November sales.

What is the budgeted accounts receivable balance on May 30?

$81,000

$68,000

$60,000

$141,000