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Lecture 9

ADMS 2510 Lecture 9: ch09.pdf


Department
Administrative Studies
Course Code
ADMS 2510
Professor
Alison Beavis
Lecture
9

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ch09
Student: ___________________________________________________________________________
1. What is the budget or schedule that provides necessary input data for the direct labour budget?
A. Raw materials purchases budget.
B. Production budget.
C. Schedule of cash collections.
D. Cash budget.
2. The cash budget must be prepared before you can complete which of the following?
A. Production budget.
B. Budgeted balance sheet.
C. Raw materials purchases budget.
D. Schedule of cash disbursements.
3. Which of the following is NOT a benefit of budgeting?
A. It uncovers potential bottlenecks before they occur.
B.
It coordinates the activities of the entire organization by integrating the plans and objectives of the
various parts.
C. It ensures that accounting records comply with generally accepted accounting principles.
D. It provides benchmarks for evaluating subsequent performance.
4. Which of the following best describes the direct materials purchase budget?
A. It is the beginning point in the budget process.
B. It must provide for the desired ending inventory as well as for production.
C. It is accompanied by a schedule of cash collections.
D. It is completed after the cash budget.
5. The master budget process usually begins with which of the following?
A. Production budget.
B. Operating budget.
C. Sales budget.
D. Cash budget.
6. Which of the following variances in a comprehensive performance report using the flexible budget
concept is the most appropriate for measuring efficiency of operations?
A. Sales volume variance.
B. Contribution margin variance.
C. Flexible budget variance.
D. Total static budget variance.
7. There are various budgets within the master budget. One of these budgets is the production budget.
Which of the following best describes the production budget?
A. It details the required direct labour hours.
B. It details the required raw materials purchases.
C. It is calculated based on the sales budget and the desired ending inventory.
D. It summarizes the costs of producing units for the budget period.

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8. Which of the following best describes a typical participative budget?
A
. It is NOT subject to review by higher levels of management since to do so would contradict the
participative aspect of the budgeting processing.
B
. It is NOT subject to review by higher levels of management except in specific cases where the input of
higher management is required.
C.
It is subject to review by higher levels of management in order to prevent the budgets from becoming
too loose.
D. It is NOT critical to the success of a budgeting program.
9. What is a continuous (or perpetual) budget?
A. It is prepared for a range of activity so that the budget can be adjusted for changes in activity.
B. It is a plan that is updated monthly or quarterly, dropping one period and adding another.
C. It is a strategic plan that does not change.
D. It is used in companies that experience no change in sales.
10. Which of the following best describes a method of budgeting in which the cost of each program must be
justified every year?
A. Operational budgeting.
B. Zero-based budgeting.
C. Continuous budgeting.
D. Responsibility accounting.
11. Fairmont Inc. uses an accounting system that charges costs to the manager who has been delegated the
authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order
that will result in higher than normal manufacturing costs, these additional costs are charged to the sales
manager because the authority to accept or decline the rush order was given to the sales manager. What
best describes this type of an accounting system?
A. Responsibility accounting.
B. Contribution accounting.
C. Absorption accounting.
D. Operational budgeting.
12. Parlee Company's sales are 30% in cash and 70% on credit. Sixty percent of the credit sales are collected
in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The
remainder is uncollectible. The following are budgeted sales data:
What would be the budgeted total cash receipts in April?
A. $27,230.
B. $36,230.
C. $38,900.
D. $47,900.
13. Budgeted sales in Allen Company over the next four months are given below:
Twenty-five percent of the company's sales are for cash, and 75% are on account. Collections for sales on
account follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale, 30%
are collected in the month following sale, and 15% are collected in the second month following sale. The
remainder is uncollectible. Given these data, what should be cash collections for December?
A. $133,500.
B. $120,000.
C. $138,000.
D. $153,000.

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14. The PDQ Company makes collections on credit sales according to the following schedule:
25% in month of sale
70% in month following sale
4% in second month following sale
1% uncollectible
The following sales have been budgeted:
What would be the cash collections in June?
A. $110,000.
B. $111,500.
C. $113,400.
D. $115,500.
15. Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are
the company's expected collection pattern and the budgeted sales for the period:
Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
What would be the estimated total cash collections during April from sales and accounts receivables?
A. $155,900.
B. $167,000.
C. $171,666.
D. $173,400.
16. Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units
on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how
many units must be produced during the month?
A. 11,500 units.
B. 12,000 units.
C. 12,500 units.
D. 14,000 units.
17. Modesto Company produces and sells Product AlphaB. To guard against stockouts, the company requires
that 20% of the next month's sales be on hand at the end of each month. Budgeted sales of Product
AlphaB over the next four months are:
What would be the budgeted production for August?
A. 50,000 units.
B. 58,000 units.
C. 62,000 units.
D. 70,000 units.
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