1. Which of the following is an example of the planning function of a budget?

A. A budget demands integrated input from different business units and functions.

B. Employees are motivated to achieve the goals set by the budget.

C. The budget outlines a specific course of action for the coming period.

D. Budget figures are used to evaluate the performance of managers.

2. Which of the following budgets focuses on the income statement and its supporting schedules?

A. The operating budget

B. The capital expenditures budget

C. The sales budget

D. The cash budget

3. The starting point in the budgeting process is the preparation of the:

A. budgeted income statement.

B. sales budget.

C. cash budget.

D. production budget.

4. A manufacturer has budgeted sales for the first quarter of the next year to be 45,000 units. The inventory in hand at the beginning of quarter is 3,000 units. The desired ending inventory is 6,000 units. Calculate the budgeted production for the quarter.

A. 51,000 units

B. 6,000 units

C. 42,000 units

D. 48,000 units

5. The direct material budget is prepared on the basis of the:

A. cash budget.

B. production budget.

C. capital expenditure budget.

D. master budget.

6. The budgeted production of Gunix Inc. is 13,000 units. Each unit requires 40 minutes of direct labor work to complete. The direct labor rate is $ 70 per hour. Calculate the budgeted cost of direct labor for the month. (Round all calculations to the nearest whole number.)

A. $ 606,667

B. $ 8,667

C. $ 22,750

D. $ 910,000

7. Which of the following is true of the sales budget?

A. It shows the value of expected production in a period.

B. It captures the variable and fixed expenses of the business.

C. It is used in the production budget.

D. It provides sales values that are used to prepare financial statements for external reporting purposes.

8. Which of the following describes the selling and administrative expenses budget?

A. It aids in planning to ensure the company has adequate inventory on hand.

B. It helps in planning to ensure the business has adequate cash.

C. It depicts the breakdown of sales based on terms of collection.

D. It captures the variable and fixed components of selling and administrative expenses of the business.

9. Which of the following describes the production budget?

A. It aids in planning to ensure the company has adequate inventory and cash on hand.

B. It helps in planning to ensure the business has adequate cash.

C. It gives the quantity of finished goods to be manufactured during a budget period.

D. It depicts the breakdown of sales on the basis of terms and conditions of collection of sales revenue.

10. Which of the following best describes the term sensitivity analysis?

A. It is an evaluation of the accuracy of the assumptions.

B. It is a testing technique to determine how results would differ if key assumptions are changed.

C. It evaluates a company's financial condition by doing financial statement analysis.

D. It is an analysis of the emotional sensitivity of a company's employees.

11. After comparing budgets with actual results, corrective action will be taken based on the differences.

True

False

12. A budget represents the plans that a company has in place to achieve its goals.

True

False

13. All organizations use one standardized budgeting process.

True

False

14. A static budget is a financial plan for a particular level of sales volume.

True

False

15. A flexible budget is prepared to represent different levels of sales volume.

True

False