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Exam 7: Introduction to Budgets and Preparing the Master Budget

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Question 1

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Managers may lie to increase the resources allocated to their department.

A) True
B) False

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Question 2

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The result of decisions to create the conditions that will generate a desired level of sales

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Question 3

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A major benefit of effective budgeting is that _____.

Activity-based budgets are an example of functional budgeting.

All of the following are operating budgets except the _____.

The first step in preparing the master budget is generally the preparation of the budgeted income statement.

Allows managers to assess the predicted impacts of various alternatives before final decisions are selected

Includes decisions to add or delete a product line or acquire buildings or equipment

Busted Company expects to produce 19,000 units.Beginning finished goods inventory is 2,000 units and expected sales are 18,000 units.Expected ending finished goods inventory is _____.

A sales forecast is _____.

A _____ gives the expected sales under a given set of conditions.

Which of the following is not a major benefit of budgeting?

Financial planning models enable managers to get answers to "what-if" questions.

_____ budgeting is when budgets are formulated with the active participation of all affected employees

Bates Corporation has prepared the following sales budget: $\begin{array}{lr}\text { Month }&\text { Expected Sales }\\\hline\text { May } & \$ 84,000 \\\text { June } & 100,000 \\\text { July } & 92,000 \\\text { August } & 116,000 \\\text { September } & 98,000\end{array}$ Credit sales are 80% of total sales.Collections are 80% in the month of sale, 15% in the month following the sale.The remaining 5% is expected to be uncollectible. Required: Prepare a schedule of cash collections for June through August.

Budgets that focus on the budgeted cost of activities required to produce and sell products and services

Cash collections from customers include the current month's cash sales plus collections on credit sales.

Cheating does not include making short-run decisions to increase profits that are not in the company's best long-run interests.

Haggle Corporation, a wholesaler, has a sales budget for next month of $300,000.Cost of units sold is expected to be 40% of sales.All units are paid for in the month following purchase.The beginning inventory of units is $10,000, and an ending amount of $12,000 is desired.Beginning accounts payable is $76,000. The ending balance in accounts payable for next month will be _____.

A major drawback of using historical results for judging current performance is that _____.