FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Operational Budgets

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

Uncontrollable external factors can create challenges in measuring the results for which managers should be held responsible. Which of the following is the best example of an uncontrollable external factor for a manager who oversees all of the operations for a business?

A) Production volumes were above normal levels so that overtime was paid to direct labour employees
B) Poor quality direct materials were purchased so more materials than usual were required in the manufacturing process
C) Raw materials prices increased due to a global shortage
D) Utilities costs were higher than normal even though weather and usage were typical for that time of year

Correct Answer

verified

Show Answer

Question 2

True/False

Review LaterAdd Note

Review Later

An unfavourable variance occurs when actual costs are lower than budgeted costs.

Correct Answer

verified

Show Answer

Question 3

True/False

Review LaterAdd Note

Profit sharing, cash bonus schemes and awards dinners are all ways of rewarding employees who achieve budget targets.

The sales volume and revenue budget is linked to the organisational strategy.

The master budget starts with a series of assumptions about future events and activities.

The purpose of the cash budget is to ensure that that entity has sufficient cash for future expansion.

Carpe Diem Ltd expects to operate at a loss in its next fiscal year. Which statement about its budgeted income statement is true?

Decision rights refer to the responsibility and financial decision making authority of each individual manager.

The operating budget is a comprehensive plan of the entity's entire financial and operational activities for an upcoming financial period.

A flexible budget is used at the end of a period to evaluate the accuracy of the original master budget.

An advantage of a flexible budget is that it:

The correct sequence for the following components in the operating budget is: I. Sales Forecast II. Production Budget III. Revenue Budget IV. Budgeted Cost of Sales

Sales of $550,000 are forecast for the third quarter. Gross profit is 40% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $215,000, what are the budgeted purchases?

Limelite Ltd, projects sales for its first three months of operation as follows: $\begin{array} { | l | l | l | l | } \hline & \text { Jaruary } & \text { February } & \text { March } \\\hline \text { Credit Sales } & \$ 150,000 & \$ 188,000 & \$ 176,000 \\\hline \text { Cash Sales } & \$ 60,000 & \$ 50,000 & \$ 55,000 \\\hline & \$ 210,000 & \$ 238,000 & \$ 231,000 \\\hline\end{array}$ Inventory on 1^st January is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale. What is the projected cost of purchases for January?

In government organisations budgets can be used to place restrictions on spending authority.

Participative budgeting involves customers and managers at all levels in the organisation.

Super Solar Systems has forecast the following unit sales and production for the next year, by quarter: $\begin{array} { | l | l | l | l | l | } \hline & 1 ^ { \text {st } } & 2 ^ { \text {nd } } & 3 ^ { \text {rd } } & 4 ^ { \text {th } } \\\hline \text { Production } & 75 & 80 & 70 & 50 \\\hline \text { Sales } & 60 & 70 & 75 & 60 \\\hline\end{array}$ Super Solar has the following beginning inventories: $\begin{array} { | l | l | } \hline \text { Firished Goods } & 50 \\\hline \text { Direct Material A } & 50 \\\hline \text { Direct Material B } & 50 \\\hline\end{array}$ A finished unit requires one unit of material A and two units of material B There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories. What is the ending inventory for material A for quarter 2?

Depreciation is a cash outflow in the cash budget.

Budgets are generally developed for the organisation as a whole as department managers do not have budget authority.

The flexible budget uses actual volume to calculate variable costs.