* Each question is worth 1 point unless otherwise indicated. Budgets are useful

Question

* Each question is worth 1 point unless otherwise indicated. Budgets are useful in: A. communication B. Coordination of organizational activities C. D. control and performance evaluation E. All of the abov planning The starting point of the master budget is and the ending point is A. materials purchases budget, budgeted financial statements B. sales budget, cash budget c. cash budget, production budget D. sales budget, budgeted financial statements B. production budget, budgeted financial statements 3.In making a production budget, the number of units to be produced for a given product i:s A. Sales units B. Sales units+ Desired Ending inventory units c. Sales units - Beginning Inventory units D. Sales units + Desired Ending Inventory units - Beginning Inventory units E. Sales units Desired Ending Inventory units Beginning Inventory units 4.Which of the following items appear in cash budgets? A. Net income; and Cash payments for operating expenses B. Depreciation expenses; and Cash payments for material purchases c. Material purchases; and Ending balance of caslh D. Cash collections from sales; and Ending balance of cash E. Sales; and Cash dividends payments

Explanation / Answer

Requirement 1 The correct alternative is E Because the budget is useful for all the alternative given in A to D 2 The correct alternative is D The starting point of the master budget is Sales Budget and budgted financial statements We began the master budget with Sales Budget and accordingly budgted financial statements are prepared based on sales estimates. All other budget comes into picture at later stage. 3 The correct alternative is D The number of units to be produced for a given product can be found out as follows Firstly we need to find out required units of product to be sold in a given period. Then we need to find the desired ending inventory required at end of given period Once, we have done both of the above, we need to add the both and deduct beginning Inventory units from the same to get the required units of product for production. 4 The correct alternative is D The other alternative (A & B) are incorrect because Cash Budget does not include the items like Net Income and Depreciation. The alternative C is incorrect because the cash budget include item like payment to supplier for purchases and cash collection from customers but not purchases and sales figures in themselves. So the correct alternative is D which include the items required in cash Budget.

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