Homework No.1 – Master Budget / Flexible Budgeting a.

is a short-range management tool

Theories b. describes the long-term position, goals, and
Choose the best answer. objectives of an organization within its
environment
1. Budgeting is c. involves evaluating specific long-term
a. the process of creating a formal plan and investment decisions
translating goals into a quantitative format d. is a short-range consideration related to
b. a technique for comparing actual costs with liquidity
standard costs 11. When developing a budget, an external factor to
c. a technique for determining the cost of consider in the planning process is
manufactured products a. The activties of the competitors
d. a means of product costing that emphasizes b. Development of a new product
activities as basic cost objects c. The implementation of employees’
2. Budgets are related to the following management retirement plan
functions, except d. A change in manaegment
a. Planning 12. A budget can be many tools in one. It can be used
b. Control for planning, communications, motivation, and
c. Performance evaluation control. For the budgetary process to serve
d. None of the above effecttively as a control tool,
3. It involves the forecasting of realizable results a. The organization must have a budget director
over a definite period or period, the planning and b. A budget committee must be organized
coordination of the various operations and c. Forecasting procedres must be developed
functions of the business to attain realizable d. The budgeting and accounting system must
results, and control variations from the approved be integrated or synchronized with the
plan organizational structure
a. Cost control 13. In developing an annual master budget, individual
b. Budgeting budget schedules are prepares. The budget
c. Internal Control schedule that would provide the necessary input
d. Vouching data for the direct labor budget would be
4. Which of the following is not a primary purpose of a. Schedule of cash receipts and discbursements
preparing a budget? b. Sales forecasts
a. To communicate the company’s plans c. Production budget
throughout the entire business organization d. Raw materials purchases budget
b. To provide basis for comparison of actual 14. The budget rpreparation process typically begins
performance with the sales budget and continues through the
c. To control revenues and expenses during a preparation of the budgeted financial statements.
given period The last budget schedule prepared before the
d. To make sure that the company expands its financial statements is the
operation a. Taxes and licenses budget
5. The master budget b. Cash budget
a. Shows a comparison of forecasted and actual c. Selling and administrative expenses budget
results d. Cost of goods sold budget
b. Is composed of the operating and financial 15. Zero-based budgeting (ZBB) is a budgetary
budgets process
c. Reflects only those costs controllable by the a. In which the budget is largely based on the
individual manager expenditures of the previous year
d. Is the budget of the master of the firm b. That presents planned activities for a period
6. A budget manual describes how a budget is to be of time, but does not present a firm
prepared. It usually includes a budget planning commitment
calendar and c. Where the budget variance is always equal to
a. The company policies regarding the zero
authorization of transactions d. That divies the activities of individual
b. Documentation of the accounting system responsibility centers into series of packages
software that are prioritized after being evaluated
c. Distribution instructions for budget schedules from a cost-benefit perspective
d. A chart of accounts 16. Unlike in zero-based budgeting, incremental
7. Following are parts of the operating budget, budgeting
except a. Requires a manger to justify the entire
a. Sales budget budget for each eyar
b. Materials cost budget b. Eliminates the need to review all functions
c. Capital budget periodically to obtain optimum use
d. Production budget ofresources
8. The starting point in preparing a comprehensive c. Simply adjusts the current year’s budget to
budget is allow for changes planned for the coming
a. The cash budget year
b. The budgeted income statement d. Starts from a base of zero
c. The sales forecast 17. A lifescyle-budget is budgeting tool or process
d. The production budget a. Which summarizes all of a company’s
9. In the budgeting process, top management should budgets and plans
a. Limit their involvement because they lack the b. In which estimates of revenues and expenses
detailed knowledge of the daily operations are rpepared for each product beginning with
b. Be involved only in the approval process the product’s research and development
c. Separate the budgeting process and the phase and traced through its customer
business planning process into two separate support phase’
process c. Which emphasizes the cost of activties
d. Be involved, including using the budget d. Which requires each manager to justify
process to communicate goals his/her unit;s entire budget each budget
period
10. Strategic budget
18. In this budgeting process, the budget is based not c. Discretionary budget
on the existing system, but on changes or d. Manufacturing budget
improvements that are to be made. It assumes the 26. The usual starting point when developing a sales
continuous improvement of products and forecast is
processes. a. The production budget
a. Zenkai Budgeting b. The cash budget
b. Kaizen Budgeting c. Last year’s level of sales
c. Tamago Budgeting d. Competitor budget information
d. Keizan Budgeting 27. A static budget is not appropriate ine valuating a
19. Flexible Budgeting ia a reporting system wherein manager’s effectiveness if a company has
the a. Substantial fixed costs
a. Budget standards may be adjusted at b. Substantial variable costs
management’s discretion c. Planned activity levels that match actual
b. Planned level of activity is adjusted to the activity levels
actual level of activity before the d. No variable costs
performance report is rpepared 28. A budgeting process in which information is
c. Reporting dates vary according to the constantly updated to provide a glance at a future
managerial levels of the suers twelve-month plans is referred to as
d. Packages of activities vary from period to a. Continuous budgeting
period b. Participative budgeting
20. The basic difference between a master budget and c. On-going budgeting
a flexible budget is that d. Joint budgeting
a. Flexible budget considers only variable cost 29. Which of the following statements about zero-
but a master budget considers all cost based budgeting is icnorrect?
b. Flexibel budget allows manaegment latitude a. All activties in the company are organized
in meeting goals whereas a master budget is into break-up units called packages
based on a fixed standard b. All costs have to be justified every budgeting
c. Master budget is for an entire prduction period
facility but a flexible budget is applicable to c. The process is not time consuming since
single department only justification of costs can be done as a routine
d. Master budget is based on one specific level matter
of production and a flexible budget can be d. Zero based budgeting icludes variable costs
prepared for any rpoduction level within a only
relevant range 30. A budgeting process in which information flows
21. Budget slack is a condition in which top down and bottom up is referred to as:
a. Demand is low at various times of the year a. Continuous budgeting
b. Excess machine capacity exists ins ome areas b. Participative budgeting
of the plant c. Perpetual Budgeting
c. There is an intentional overestimate of d. Joint budgeting
expenses or an underestimate of revenues
d. Managers grant favored employees extra
time-off
22. Doggy company is manufacturer of small
appliances. For which of the following activities
would Doggy be more likely to use a static budget
than a flexible budget?
a. For planning the amaount of direct materials
that will need to be purchased in the
upcoming year
b. For the evaluation of whether or not actual
direct labor costs were reasonably close to
budgeted direct labor costs’
c. For the evaluation of whether or not actual
manufacturing overhead costs were under or
over-applied during the year
d. For the evaliation of whether or not
employees made the more efficient use of
their time
23. Which of the following is the different between a
static budget and flexible budgets?
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 icnludes only fixed costs
c. A flexible budget gives different allowances
for different levels ofa ctiivty while a static
budget does not
d. There is no difference between the two
24. An overly optimistic sales budget may result
a. Increases in selling prices late in the year
b. Insufficient inventories
c. Increased sales during the year
d. Excessive inventories
25. If a company wishes to establish a factory
overhead budget system in which estimated costs
can be derived directly frome stimates of activity
levels, it should rpepare
a. Flexible budget
b. Program budget
Problem Solving: F. Ernie Trading Co. budgeted merchandise purchases
of 40,000 units next month. The expected beginning
A. Claire guitars, Inc. specializes in producing guitars of inventory is 12,000 units and the desired inventory
different variety. In December 31, the company had at the end of the next month is 15,000 units.
1,000 guitar A in inventory . The company’s policy is
to maintain a guitar A inventory that is equal to 5% of Budgeted sales in units for the next month is?
next month’s budgeted sales. The company expects
the following sales actiivty for the first quarter of the G. Hershey Company has budgeted sales of 90,000
year as : units in january, 120,000 units in Ferbruary, and
180,000 units in March. The company has 20,000
January : 15,000 gutar A units on hand on January 1.
February: 20,000 guitar A
March: 23,000 guitar A If Hershey Company requires an ending inventory
of finished goods equal to 20% of the following
What is the projected production for February? motnh’s sales, the budgeted production during
February should be?
B. Montalbo Company’s sales budget shows the
following expected sales for the following year: H. Tasyo Company has budgeted sales of 90,000 units
in January, 120,000 units in February, and 180,000
Quarter Units units in March. The company has 20,000 units of
First 120,000 finished goods and 35,000 pieces of materials on
Second 160,000 hand on January 1. Each unit of product requires 5
Third 90,000 pieces of materials . The desired inventory of
Fourth 110,000 finished goods and materials at the end of each
month is as follows:
Total 480,000
Finished Goods: 20% of the next month’s sales
The inventory at December 31 of the prior year
Materials: 25% of next month’s production
was budgeted at 36,000 units. The quantity of
needs
finished goods inventory at the end of each quarter is
to equal 30% of the enxt quarter’s budgeted unit
How many pieces of materials should the
sales.
company plan to purchse in January?
How many units should be produces during the first
I. Fame company has the following budget formula
quarter?
for factory overhead costs:
C. Violin Company manufatcures a single product. It
FOH = P 5,000,000 per month + P 300 per unit of
keeps its inventory of finished goods at twice the
product
coming month’s budgeted sales and inventory of raw
materials at 150% of the coming month’s budgeted
If the company plans to produce 50,000
production requirements. Each unit of product
units in January, how much is the budgeted factory
requires two pounds of materials. The production
overhead cost?
budgets in units consist of the following:

May: 1,000 units

J. Garcia Corporation has the following budget
June: 1,200 units
estimate for the year 2020:
July: 1,300 units
August: 1,600 units
Sales: P2,800,000
Income Before Tax: 10% of Sales
Raw material purchases in June would be?
Selling and Administrative Expenses:25% of Sales
Conversion Cost; 70% of total manufacturing cost
D. Sampras Company budgets in sales of its only product
for the coming year at 300,000 units. Production of
Inventories are budgeted as follows:
one unit of product requires 3 pounds of Material Q
and 2 pounds of Material L. Inventory at the
Beginning Ending
beginning of the year and budgeting ending inventory
are: Materials P176,000 P216,000
WIP P200,000 P240,000
Actual, January Budgeted, Finished P280,000 P336,000
1 December 31 Goods
Finished Goods 60,000
Materials Q 80,000 60,000 J.1 What is the budgeted cost of goods sold?
Material L 88,000 96,000 J.2 The budgeted purchases of raw materials is?

How many pounds of Material Q is Sampras Company

planning to buy during the coming year?

E. Caress Co. has projected its sales to be 600,000 pesos

in January, 750,000 pesos in February, and 800,000
pesos in March. Caress wants to have 50% of next
month’s sales need on hand at the end of each month.

If Caress has an average gross profit of 40%, what

are the February purhhases in peso?