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Operating Budgets(Quick Test)

Author:
Harold Averkamp, CPA, MBA

After you have answered all 25 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers.

Note: Some of the following test questions may not have been covered in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page.

    1. 1. Prior to the preparation of the master budget, a company’s__________ and the strategies for achieving them should be articulated by the leaders of the company.

    2. 2. The production budget is driven by the __________ budget.

    3. 3. A company’s profit plan or __________ budget includes all of the operating and financial budgets.

    4. 4. A budget that will increase when volume increases is referred to as a __________ budget.

    5. 5. The difference in the number of units in the sales budget versus the number of units in the production budget is explained by the change in the number of units in __________.

    6. 6. The materials needed for each unit to be manufactured can be found in each product’s __________ of materials.

    7. 7. Accountants refer to the differences between budgeted amounts and actual amounts as favorable or unfavorable__________.

    8. 8. Management by __________ has its focus on the deviations from the expected amounts.

    9. 9. A budgeted financial statement is sometimes referred to as a pro-__________ financial statement.

    10. 10. __________ costs are predetermined costs for direct materials, direct labor, and manufacturing overhead that are based upon the per unit amounts in the company’s annual profit plan.

    11. 11. __________ budgeting focuses on the expenditures for fixed assets that will likely affect the operating budgets of several years.

    12. 12. The sales and production budgets will include the number of units of product as well as dollar amounts.

    13. 13. A __________ budget is the better measure of a department’s efficiency.

    14. 14. The cash budget is referred to as __________ __________ budget.

    15. 15. The budgeted income statement is part of the __________ budget.

    16. 16. The __________ budget consists of the materials budget, the labor budget, and the manufacturing overhead budget.

    17. 17. The master budget is typically prepared for __________ __________.

    18. 18. Which type of planning has a more long-term focus?

    19. 19. A budget that adds a future month and deletes the month that has just ended is referred to as a __________ budget.

    20. 20. A company is forecasting its sales for next year to be 150,000 units. At the end of the current year it expects to have 10,000 units in inventory and to end next year with 12,000 units in inventory. The number of units to be produced during the next year should be __________ units.

    21. Use the following information for answering Questions 21 - 22:
      A company's sales budget includes the following forecast:

      40% of each month's sales are collected in the month of the sales, and the remaining 60% is collected in the month following the sales.

    22. 21. The expected amount of cash to be received during March is $__________.

    23. 22. The projected balance in Accounts Receivable at March 31 is $__________.

    24. Use the following information for Questions 23 - 25:
      A company's production budget shows the following number of units of product to be manufactured in the next year:

      Each unit of product requires two pounds of plastic pellets.

      The company's practice is to have on hand at the end of each month 60% of the pounds of plastic pellets required for the following month's production.

      The purchases of pellets occur throughout each month at the contracted price of $1.50 per pound. The purchases for each month are paid for in the month following the purchase.

    25. 23. The number of pounds of plastic pellets that needs to be on hand at the end of February is __________ pounds.

    26. 24. The number of pounds of pellets to be purchased in March will be__________ pounds

    27. 25. The amount to be remitted in April for the purchase of plastic pellets is $__________.

Any questions left unanswered will be marked incorrect.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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