TRUE OR FALSE and Multiple

1. The usual starting point in budgeting is to make a forecast of net income.
2. A budget committee helps provide consistency in the budgeting process because it prepares all of the budgets for the various segments of the organization.
3. A continuous or perpetual budget is one which covers a 12-month period but which is constantly adding a new month on the end as the current month is completed.
4. Control involves developing objectives and preparing the various budgets to achieve those objectives.
5. A self-imposed budget is one prepared by top management and passed downward through an organization.
6. When using the self-imposed budget approach, it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioral responses from employees.
7. Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period.
8. In a production budget, the required number of units to be produced will depend on the number of units to be sold plus the beginning finished goods inventory less the ending finished goods inventory.
9. The direct materials to be purchased for a period can be obtained by adding the desired ending inventory of direct materials from the total direct materials needed for the period.
10. The direct labor budget is based on the sales budget. Test 2 Multiple Choice
11. The usual starting point for a master budget is the:

A) direct materials purchase budget.

B) budgeted income statement.

C) sales forecast or sales budget.

D) the production budget.

12. From the sales forecast, the next budget prepared is the

A) direct materials purchase budget.

B) budgeted income statement.

C) sales forecast or sales budget.

D) production budget.

13. The following budgets are prepared before the cash budget:

	Selling and Administrative Expense Budget	Production Budget
A)	Yes	Yes
B)	Yes	No
C)	No	Yes
D)	No	No

14. From the production budget, the following budgets are then prepared:

Direct Labor Budget Direct Materials Budget

A)	Yes Yes
B)	Yes No
C)	No Yes
D)	No No

15. Which of the following benefits could an organization reasonably expect from an effective budget program?

A) Better control of the organization's costs.

B) Better coordination of an organization's activities.

C) Better communication of the organization's objectives.

D) All of the above.

16. An organization's budget program should not be used to:

A) motivate employees.

B) assign blame to managers that do not meet budgetary goals.

C) help evaluate managers.

D) allocate resources to the various parts of an organization.

17. A basic idea underlying __________________ is that a manager should be held responsible only for those items that the manager can actually control to a significant extent.

A) participative budgeting

B) planning and control

C) responsibility accounting

D) the master budget

18. Which of the following statements is NOT correct concerning the Cash Budget?

A) It is not necessary to prepare any other budgets before preparing the Cash Budget.

B) The Cash Budget should be prepared before the Budgeted Income Statement.

C) The Cash Budget should be prepared before the Budgeted Balance Sheet.

D) The Cash Budget depends on earlier budgets and schedules prepared plus additional data.

19. Required production volume of 2,500 requires 500 kilowatt hours usage for March. Heat light and power is semi variable with a rate of is P2 per kilowatt hour plus a fixed cost base of P1,200. How much is the heat light and power budget for March?

A) P1,200

B) P1,000

C) P2,200

D) P5,000

20. Veronique Company's sales budget shows the following projections for next year, 80% to be collected in the month of sales and the balance in the following month::

		Sales in units
	First Quarter......................	80,000
	Second Quarter.................	60,000
	Third Quarter.....................	40,000
	Fourth Quarter...................	50,000

If sales price is P5, how much revenue should be reported for the third quarter?

1. P200,000
2. 80% of P200,000 or P160,000
3. 20% of 300,000 + 80% of P200,000 or P220,000
4. 180,000 x P5 or P900,000