Financial and Managerial Accounting: The Basis for Business Decisions, 12/e

Jan R. Williams, University of Tennessee
Susan F. Haka, Michigan State University
Mark S. Bettner, Bucknell University
Robert F. Meigs

Operational Budgeting

Multiple Choice Quiz

Please answer all questions


1	Which of the following is not a factor that causes some businesses to become profit rich, yet cash poor?
		A)	Rapid sales growth.
		B)	An unusually long operating cycle.
		C)	Slow inventory turnover.
		D)	Fast accounts receivable turnover.


2	Which of the following steps in the preparation of a master budget would logically be performed last?
		A)	Prepare a budgeted balance sheet.
		B)	Prepare a sales forecast.
		C)	Prepare production schedules.
		D)	Prepare a cash budget.


3	Which of the following steps in the preparation of a master budget would logically be performed first?
		A)	Prepare a budgeted balance sheet.
		B)	Prepare a sales forecast.
		C)	Prepare production schedules.
		D)	Prepare a cash budget.


4	A cash budget:
		A)	Would be as useful to a business which makes sales only on a credit basis, as it is to a business making sales for cash.
		B)	Should include labor, material, and overhead variances.
		C)	Should ignore any projected balances of a negative amount of cash.
		D)	Should not include payments for noncontrollable elements of factory overhead.


5	In preparing a cash budget, the budgeted level of cash payments would take into account all of the following except:
		A)	The credit terms offered by suppliers.
		B)	Experience in collecting receivables.
		C)	Forecasts of manufacturing costs.
		D)	Planned capital expenditures.

Use the following data for questions 6 and 7.

The following information is from the manufacturing budget and budgeted financial statements of Pinecove Industries:

Direct materials inventory, 1/1	$ 104,000
Direct materials inventory, 12/31	128,000
Direct materials budgeted for use during year	400,000
Accounts payable to suppliers, 1/1	80,000
Accounts payable to suppliers, 12/31	120,000


6	Refer to the information above. For the year, budgeted purchases of direct materials amounted to:
		A)	$360,000.
		B)	$376,000.
		C)	$384,000.
		D)	$424,000.


7	Refer to the information above. For the year, budgeted cash payments to suppliers amounted to:
		A)	$360,000.
		B)	$376,000.
		C)	$384,000.
		D)	$424,000.

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