1. Which of the following is NOT an advantage of budgeting?

a.

It requires managers to state their objectives.

b.

It facilitates control by permitting comparisons of budgeted and actual results.

c.

It facilitates performance evaluation by comparing budgets with actual results.

d.

It provides a check-up device that allows managers to keep close tabs on their subordinates.

2. Budgets are a necessary component of financial decision making because they provide a (n)

a.

Efficient allocation of resources

c.

Means to check managerial discretion

b.

Means to use all the firm's resources

d.

Automatic corrective mechanism for errors

3. In an organization that plans by using comprehensive budgeting, the master budget is

a.

A compilation of all the separate operational and financial budget schedules of the organization

b.

The booklet containing budget guidelines, policies and forms to use in the budgeting process

c.

The current budget updated for operations for part of the current year

d.

A budget for a non-profit entity after it is approved by the appropriate authoritative body

4. The sales budget is classified as

a.

A financial budget

c.

An operating budget

b.

A flexible budget

d.

A program budget

5. Ohio Company developed the following sales forecasts and associated probabilities.

Sales Forecast

Probability

P 600,000

10%

P 650,000

50%

P 700,000

35%

P 800,000

5%

What is the expected value of sales?

a.

P 650,000

c.

P 667,500

b.

P 670,000

d.

P 800,000

6. Which of the following equations can be used to budget purchases? (BI = Beginning inventory, EI = ending inventory desired, CGS = Budgeted cost of goods sold)

a.

Budgeted purchases = CGS + BI - EI

c.

Budgeted purchases = CGS + EI + BI

b.

Budgeted purchases = CGS + BI

d.

Budgeted purchases = CGS + EI - BI

7. Colorado Company desires an ending inventory of P 60,000. It expects sales of P 120,000 and has a beginning inventory of P 40,000. Cost of sales is 60% of sales. Budgeted purchases are

a.

P 60,000

c.

P 92,000

b.

P 72,000

d.

P 132,000

8. Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that would provide the necessary input data for the direct labor budget would be the

a.

Sales forecast

c.

Schedule of cash receipts and disbursements

b.

Raw materials purchases budget

d.

Production budget

9. South Dakota Company budgets sales of 22,000 units for January, 30,000 for February. The budgeted beginning inventory for January 1 was 7,000 units. South Dakota desires an ending inventory equal to one-half of the following month's sales needs. What is the budgeted production for January?

a.

37,000 units

c.

26,000 units

b.

30,000 units

d.

14,000 units

10. New Mexico Company plans to sell 24,000 units of Product A in July and 30,000 units in August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory must equal 3,000 units plus 30% of the next month's sales. On June 30, this requirement was met. Based on these data, how many units of Product A must be produced during the month of July?

a.

28,800

c.

24,000

b.

22,200

d.

25,800

11. Florida keeps its inventory of finished goods at 75% of the coming month's budgeted sales and inventory of raw materials at 50% of the coming month's budgeted production needs. Each unit of product requires 2 pounds of materials. The production budget is, in units: May, 1,000; June, 1,200; July, 1,300; August, 1,600. What would be the raw material purchases in June?

a.

1,525 pounds

c.

2,800 pounds

b.

2,500 pounds

d.

3,050 pounds

12. New Jersey Co. is budgeting sales of 53,000 units of product A1 for 2022. The manufacture of one unit of A1 requires 4 kilos of chemical Z5. During 2022, New Jersey plans to reduce the inventory of Z5 by 50,000 kilos and increase the finished goods inventory of A1 by 6,000 units. There is no work-in-process inventory. How many kilos of Z5 is New Jersey budgeting to purchase in 2022?

a.

138,000

c.

186,000

b.

162,000

d.

238,000

13. Washington Company has the following 2022 budget data:

Beginning finished goods inventory

40,000 units

Sales

70,000 units

Ending finished goods inventory

30,000 units

Direct materials

P 10 per unit

Direct labor

P 20 per unit

Variable factory overhead

P 5 per unit

Fixed factory overhead

P 80,000

What are the 2022 total budgeted production costs?

a.

P 2,100,000

c.

P 2,240,000

b.

P 2,180,000

d.

P 2,320,000

14. Montana Company's budget contains the following information:

Units

Beginning finished goods inventory

85

Beginning work-in-process in equivalent units

10

Desired ending finished goods inventory

100

Desired ending work-in-process in equivalent units

40

Projected sales

1,800

How many equivalent units should Montana plan to produce?

a.

1565

c.

1815

b.

1800

d.

1845

15. The information contained in a cost of goods manufactured budget most directly relates to the

a.

Materials used, direct labor, overhead applied, and ending work-in-process

b.

Materials used, direct labor, overhead applied, and work-in-process inventories budgets

c.

Materials used, direct labor, overhead applied, and work-in-process inventories, and finished goods inventories budgets

d.

Materials used, direct labor, overhead applied, and finished goods inventories budgets