1. Companies often choose to hold ___________ to serve as buffers in case of uncertainties in demand or production.
a. a minimum level of inventory
b. a maximum level of inventory
c. the number of units of projected sales plus a minimum level of extra inventory
d. number of units of projected sales plus a minimum level of extra inventory
2. Which of the following is not included in the production budget?
a. Sales forecast
b. Ending inventory of work in process
c. Beginning inventory of finished goods
d. Desired ending inventory of finished goods
3. If the sales forecast for September is 500,000 units and the increase in finished goods inventory is 50,000 units, what is the required production for September?
a. 550,000 units
b. 500,000 units
c. 450,000 units
d. 50,000 units
4. A company's forecasted sales for the first quarter include: 50,000 units, 65,000 units, and 70,000 units. If the company maintains 15% of the next month's sales forecast in inventory, then what is the beginning inventory of finished goods in February?
a. 15,000 units
b. 9,750 units
c. 7,500 units
d. 5,000 units
5. The responsibility of developing an annual budget is normally assigned to
a. the CEO.
b. a budget committee.
c. the board of directors.
d. the stockholders.
6. The first step in preparing a flexible budget is to
a. identify the fixed and variable cost components.
b. prepare the budget for each activity level by multiplying each variable cost per unit by the activity level and then adding the fixed costs.
c. identify the relevant activity levels.
d. None of these choices are correct.
7. A budget that shows the expected results of a responsibility center for only one activity level is known as a __________ budget.
a. static
b. zero-based
c. flexible
d. single activity
8. A master budget includes
a. financial budgets.
b. a sales budget.
c. expense budgets.
d. All of these choices are correct.
9. The financial budgets provide information for the budgeted
a. income statement.
b. balance sheet.
c. statement of cash flows.
d. None of these choices are correct.
10. All of the following are integrated into the cost of goods sold budget except the __________ budget.
a. direct labor cost
b. direct materials purchases
c. factory overhead cost
d. selling and administrative expenses
11. The __________ is often used as the starting point for the selling and administrative expenses budget.
a. sales budget
b. factory overhead cost budget
c. payroll register
d. cost of goods sold budget
12. Pisa Trophy Co. budgeted production of 50,000 brass trophies for the coming year. Each trophy requires engraving. Assume that 15 minutes are required to engrave each trophy. If engraving labor costs $15.00 per hour, determine the direct labor cost budget for the year.
a. $750,000
b. $12,500
c. $187,500
d. None of these choices are correct.
13. The budgeted units to be produced are determined by which of the following formulas?
a. Expected Units to Be Sold - Desired Units in Ending Inventory + Estimated Units in Beginning Inventory
b. Expected Units to Be Sold - Desired Units in Ending Inventory - Estimated Units in Beginning Inventory
c. Expected Units to Be Sold + Desired Units in Ending Inventory + Estimated Units in Beginning Inventory
d. Expected Units to Be Sold + Desired Units in Ending Inventory - Estimated Units in Beginning Inventory
14. All of the following budgets are considered financial budgets except the __________ budget.
a. cash
b. capital expenditures
c. sales
d. None of these choices are correct.
15. A budget that estimates the expected receipts (inflows) and payments (outflows) of cash for a period of time is called a __________ budget.
a. sales
b. capital expenditures
c. cash
d. None of these choices are correct.
16. Budgeting involves
a. establishing specific goals.
b. executing plans to achieve the goals.
c. periodically comparing actual results with the goals.
d. All of these choices are correct.
18. Budgeting affects all of the following managerial functions except
a. planning.
b. directing.
c. controlling.
d. None of these choices are correct.