Multiple choice questions on budgetary control system.

1. Which of the following represents the normal sequence in which the below budgets are prepared.

a.Sales, Balance Sheet, Income Statement

b.Balance Sheet, Sales, Income Statement

c.Sales, Income Statement, Balance Sheet

d.Income Statement, Sales, Balance Sheet

2. In preparing a master budget, top management is generally best able to:

a.Prepare detailed departmental-level budget figures.

b.Provide a perspective on the company as a whole.

c.Point out the particular persons who are to blame for inability to meet budget goals.

d.Responses a, b, and c are all correct.

3. When preparing a production budget, the required production equals:

a.Budgeted sales + beginning inventory + desired ending inventory

b.Budgeted sales - beginning inventory + desired ending inventory

c.Budgeted sales - beginning inventory - desired ending inventory

d.Budgeted sales + beginning inventory - desired ending inventory.

4. If a cost is a common cost of the segments on a segmented income statement, the cost should:

a.Be allocated to the segment on the basis of segment sales.

b.Not be allocated to the segments.

c.Excluded from the income statement.

d.Treated as a product cost rather than as a period cost.

5. Some investment opportunities which should be accepted from the viewpoint of the entire company may be rejected by a manger who evaluated on the basis of:

a.return on investment

b.residual income

c.contribution margin

d.segment margin

6. Two or more products produced from a common input are called:

a.Common costs.

b.Joint Products.

c.Joint costs.

d.Sunk costs.

7. If a company has computed a project profitability index of -0.015 for an investment project, then:

a.The project's internal rate of return is less than the discount rate.

b.The project's internal rate of return is greater than the discount rate.

c.The project's internal rate of return is equal to the discount rate.

d.The relationship of the internal rate of return and the discount rate is impossible to determine from the data given.

8. If the internal rate of return of an investment in equipment is equal to the discount rate:

a.The net present value of the investment will be zero.

b.The payback period of the investment will be equal to the useful life of the equipment.

c.Neither A nor B above will be true.

d.Both A and B above will be true.

9. If taxes are ignored, all of the following items are included in a discounted cash flow analysis except:

a.Future operating cash savings.

b.Depreciation expense.

c.Future salvage value.

d.Investment in working capital.