Budgeting Chapter 12 Test Bank

Chapter 12: Budgeting

Test Bank

Type: multiple choice question

Title: Chapter 12 Question 01

1) Which is not a valid purpose of budgets?

a. Authorization of expenditure

b. Motivation of staff

c. Determining the value of a company

d. Assessing the performance of an organization

Type: multiple choice question

Title: Chapter 12 Question 02

2) Which is the usual logical sequence of constructing functional budgets?

a. Calculate production level, set raw material usage, agree raw material purchases, agree level of sales volumes and prices.

b. Agree level of sales volumes and prices, calculate production levels, set raw material usage, agree raw material purchases.

c. Agree level of sales volumes and prices, calculate production levels, agree raw material purchases, set raw material usage.

d. Calculate production levels, agree level of sales volumes and prices, agree raw material purchases, set raw material usage.

Type: multiple choice question

Title: Chapter 12 Question 03

3) Which is not an example of a limiting factor?

a. Machine capacity

b. Sales volume

c. Head office allocated costs

d. Raw material quantities

Type: multiple choice question

Title: Chapter 12 Question 04

4) What makes up a master budget?

a. The cashflow forecast

b. Budgeted statement of profit or loss and budgeted statement of financial position

c. Production, sales and cost budgets for an organization

d. Budgeted statement of profit or loss , budgeted statement of financial position and cashflow forecast

Type: multiple choice question

Title: Chapter 12 Question 05

5) Calculate the production budget from the following data: sales 35,780 units; opening inventory 3,548 units; closing inventory 4,286 units.

a. 36,518 units

b. 43,614 units

c. 35,042 units

d. 27,946 units

Type: multiple choice question

Title: Chapter 12 Question 06

6) A business plans to manufacture 400 watches a week, each taking 0.5 labour hours to produce. What is the total direct labour budget if the direct labour rate is £15 per hour and a pay rise of 12% is awarded three months into the year?

a. £156,000

b. £174,720

c. £173,550

d. £170,040

Type: multiple choice question

Title: Chapter 12 Question 07

7) What is meant by a zero-based budget?

a. The level of budgeted overheads, if there were no sales

b. A budget prepared from first principles

c. The variable elements of a budget, excluding fixed costs

d. A budget which breaks even

Type: multiple choice question

Title: Chapter 12 Question 08

8) Which can be considered to be an advantage of a top-down budget?

a. Uses the knowledge of all staff to build a fair budget

b. Devolves responsibility down the organization, through employee involvement

c. Motivates staff through participation

d. Cost effective to produce as it involves only a few people with less negotiations

Type: multiple choice question

Title: Chapter 12 Question 09

9) What would be the most likely cause of a favourable material price variance together with an unfavourable material quantity variance?

a. The purchase and use of lower than standard quality of material

b. A labour efficiency problem

c. The purchase and use of higher than standard quality of material

d. Machine efficiency problem

Type: multiple choice question

Title: Chapter 12 Question 10

10) A firm has produced the following budget for an activity level of 5,000 units:

Materials 45,000

Direct labour 60,000

Salaries 25,000

Depreciation 12,000

What would be the total cost for a level of activity of 7,500 units?

a. £164,500

b. £194,500

c. £213,000

d. £207,000