1. Which of the following would be the first step in preparing the master budget? A. Sales budget, because knowing the sales we can determine how much we are going to produce and have in inventory. b. Budget for raw material purchases, because that way we know how much we can produce and sell. c. Cash budget, because that way we know how much money we have to pay for production costs. d. Sales forecast, because it gives us an estimate of the total sales of our industry and the portion of those sales (market share) that our company will be able to obtain.

2. A company prepared a budget for each month of 2021. When the month of January 2021 ended, the company prepared a budget for January 2022. It continued this practice at the end of each month. This practice is known as: A. Continuous budget or Rolling budget b. Zero-based budget c. Program budget d. None of the above

3. Capital budgets cover periods of: A. One or more months of the same year b. One year, since you cannot make budgets for more than one year c. Several years, as they have to do with the acquisition of long-lived assets d. None of the above

4. Budgets are highly recommended for: to. Manufacturing, trading, or service business enterprises b. Non-profit companies c. Governments d. All of the above

5. The concepts of ABC and ABM: A. They cannot be applied to the budget process b. They can be applied to the budget process, but they do not result in an effective process. c. They can be applied to the budget process and hence the ABB concept was born d. Frankly i have no idea

. When the interactions of the elements of the master budget are expressed as a set of mathematical relations, it becomes a financial planning model that can be used to answer what if questions about unknown variables.

A. TRUE b. FALSE