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Multiple Choice Quiz
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1
Which of the following is not a primary purpose of a budgeting system?
A)Planning
B)Facilitating communication and coordination
C)Allocating resources
D)Determining the most profitable operating division.
E)All of the above would be considered a primary purpose.
2
Which of the following is not one of the operational budgets?
A)Direct-material budget
B)Selling expense budget
C)Budgeted income statement
D)Production budget
E)Administrative expense budget
3
Which of the following is a benefit of utilizing the ABC information in the budgeting process for activity-based budgeting (ABB)?
A)It reveals how costs will change if the predicted quantities of cost drivers change
B)Activity-based budgeting can more clearly identify costs that are really variable
C)It provides solid reasoning for budgeting costs at particular levels
D)None of the above
E)A, B, and C are benefits of ABB
4
Consider the following budgeted information, regarding selling, general, and administrative expenses:
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What are the total expenses for a selling, general, and administrative expense budget at a sales-level of 24,000 units?
A)$346,800
B)$275,000
C)$230,000
D)$300,800
E)$291,800
5
You are responsible for preparing the following budgets:
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In which order should you prepare these budgets?
A)A, B, C, D, E
B)A, D, B, E, C
C)A, C, B, D, E
D)C, A, B, E, D
E)C, A, B, D, E
6
Consider the following time periods:
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The time periods (quarterly) are for the third year of operations. The desired ending inventory is 10% of the budgeted sales in units of the next period. How many units will be produced in the first time period, assuming the beginning inventory of the first time period is based on the desired ending inventory of the previous period?
A)12,100
B)13,300
C)11,900
D)15,500
E)Cannot be determined from the information provided.
7
Consider the following:
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Three units of raw material are required for each unit of finished product. If the company plans to sell 420,000 finished units, how many units of raw material must be acquired to meet the production schedule and to provide for the desired ending inventory of raw material?
A)1,275,000
B)1,305,000
C)1,285,000
D)1,300,000
E)1,135,000
8
Consider the following budgeted production schedule:
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Direct labor of .5 hours per unit is required. Direct labor is paid at a rate of $15 per hour. What is the total direct-labor cost planned for Period 3?
A)$250,000
B)$750,000
C)$375,000
D)$125,000
E)None of the above
9
Consider the following information for Laser Corporation:
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September was Laser's first month of operations. Assume that 75% of the monthly sales were made on credit with the balance of 25% being cash sales. Collections on credit sales are 80% in the month of sale, 15% in the month following the sale and 5% in the second month following the sale.
What is the amount of cash scheduled to be collected for the month of November?
A)$68,225
B)$68,000
C)$68,300
D)$57,800
E)None of the above

10
Consider the following information for Laser Corporation:
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September was Laser's first month of operations. Assume that 75% of the monthly sales were made on credit with the balance of 25% being cash sales. Collections on credit sales are 80% in the month of sale, 15% in the month following the sale and 5% in the second month following the sale. What is the Laser's budgeted receivable balance at the end of November?
A)$17,800
B)$13,125
C)$12,900
D)$30,300
E)None of the above
11
Consider the following information for Laser Corporation:
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September was Laser's first month of operations. Assume that 75% of the monthly sales were made on credit with the balance of 25% being cash sales. Collections on credit sales are 80% in the month of sale, 15% in the month following the sale and 5% in the second month following the sale.

Assume that Laser desires to maintain a minimum cash balance of $5,000 and will borrow (on a short term basis) in order to accomplish this requirement. Excess cash balances (i.e. above $5,000 ) are used to repay any previous borrowings.

Ignoring interest, what is the balance owed at the end of November for short term borrowing?
A)-0-
B)$ 5,900
C)$10,900
D)$15,200
E)None of the above
12
Consider the following equation:
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The equation above is an example of which of the following?
A)A financial planning model.
B)A model that can be run on a computer to test "what if" questions.
C)A common management tool.
D)All of the above.
E)None of the above
13
Which of the following is one of the phases in a product's life cycle?
A)Product planning and concept design
B)Detailed design and testing
C)Production
D)Preliminary design
E)All of the above.
14
The educational departments of a university issue 60% of their purchase orders within one week of the cut-off date for incurring encumbrances against their expenditure budgets. Which of the following is a probable cause of this phenomenon?
A)The department budgets are padded.
B)There is considerable budgetary slack in the budgets.
C)There is no incentive to save.
D)All of the above.
E)None of the above
15
Which term is used when discussing the difference between an individual's submitted budget projection and his or her best estimate of the item being projected?
A)Budget padding
B)Budget variance
C)Budgetary slack.
D)Participative budgeting
E)Activity-based budgeting (ABB)





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