26. A company has prepared a cash budget for January through June of 2021. Which of the following, discovered in February 2021, is LEAST likely to require revising the cash budget?

a.

February sales are lower than budgeted.

b.

The interest rate on short-term borrowing is higher than budgeted.

c.

The company increased from 10% to 20% the down payment it requires from customers.

d.

The company changed inventory methods from LIFO to FIFO.

27. The last pro forma statement prepared under a typical budgeting process is the

a.

Income statement

c.

Statement of cash flows

b.

Statement of cost of goods sold

d.

Statement of manufacturing costs

28. In the preparation of a cash budget with clear-cut information on sources and uses of funds, all of the following would classified as a cash flow under investing activities, EXCEPT:

a.

Collection of a loan from subsidiary

c.

Sale of plant assets

b.

Purchase of a patent from an inventor

d.

Dividends received on stock investment

29. In the preparation of a cash budget with clear-cut information on sources and uses of funds, all of the following would classified as a cash flow under financing activities, EXCEPT:

a.

The conversion of the company's own preferred stock into common stock

b.

The declaration and payment of a cash dividend on the company's own common stock

c.

The repayment of principal on a mortgage

d.

The sale of the company's own preferred stock for cash

30. North Carolina projects the following activities related to its financial operations:

a. Issuance of shares of company's own common stock: P 170,000

b. Dividends to be paid to the company's own shareholders: P 7,000

c. Dividends to be received from investments in other companies' shares: P 4,000

d. Interest to be paid on the company's own bonds: P 11,000

e. Repayment of principal on the company's own bonds: P 40,000

f. Proceeds from sale of the company's used equipment: P 23,000

In cash financial budget, the net cash used by financing activities should be projected to be

a.

P 375,000

c.

P 112,000

b.

P 123,000

d.

P 19,000

31. The budget that describes the long-term position, goals, and objectives of an entity is the

a.

Capital budget

c.

Cash management budget

b.

Operating budget

d.

Strategic budget

32. The budgeting process should be one that motivates managers and employees to work toward organizational goals. Which one of the following is LEAST likely to motivate managers?

a.

Participation by subordinates in the budgetary process

b.

Having top management set budget levels

c.

Use of management by exception

d.

Holding subordinates accountable for the items they control

33. Comparing actual results with a budget based on achieved (actual) volume is possible with the use of a

a.

Monthly budget

c.

Rolling budget

b.

Master budget

d.

Flexible budget

34. Which one of the following budgeting methodologies would be most appropriate for a firm facing a significant level of uncertainty in unit sales volumes next year?

a.

Static budgeting

c.

Top-down budgeting

b.

Flexible budgeting

d.

Life-cycle budgeting

35. A flexible budget is

a.

One that can be changed whenever a manager so desires.

b.

Adjusted to reflect expected costs at the actual level of activity.

c.

One that uses the formula 'total cost = cost per unit x units produced'

d.

The same as a continuous budget.

36. Which of the following is a difference between a static budget and a flexible budget?

a.

A flexible budget includes only variable costs; a static budget includes only fixed costs.

b.

A flexible budget includes all costs; a static budget includes only fixed costs.

c.

A flexible budget gives allowances for different levels of activity while a static budget does not.

d.

None of the above.

37. A company has developed the budget formula below for estimating its shipping expenses. Shipments have historically averaged 12 pounds per shipment.

Shipping costs = P 18,000 + (P 0.60 x pounds shipped)

The planned and actual activity regarding orders and shipments for the month are given in the following schedule:

Plan

Actual

Sales orders

800

780

Shipments

800

820

Units shipped

8,000

9,000

Sales

P 120,000

P 144,000

Total pounds shipped

9,600

12,500

The actual shipping costs for the month amounted to P 21,000. What should be the appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation?

a.

P 18,000

c.

P 23,760

b.

P 18,492

d.

P 25,500

38. The difference between the actual amounts and the flexible budget amounts for the actual output achieved is the

a.

Production volume variance

c.

Sales volume variance

b.

Flexible budget variance

d.

Standard cost variance

39. 'Kaizen' budgeting refers to the budgeting process where

a.

The budget is based on only one level of activity

b.

The budget is based on many levels of activity so that budget may be adjusted based on actual activity

c.

The budget is based not on the existing system, but on changes or improvements that are to be made

d.

A product's revenues and expenses are estimated over its entire life cycle (i.e., from R&D phase to customer support phase)

40. The budget method that maintains a constant twelve month planning horizon by adding a new month on the end as the current month is completed is called

a.

An operating budget

c.

A continuous budget

b.

A capital budget

d.

A master budget