1. Which of the following budgets allow for adjustments in activity levels?

A) Static Budget

B) Continuous Budget

C) Zero-Based Budget

D) Flexible Budget


2. McCabe Manufacturing Co.’s static budget at 8,000 units of production includes $40,000 for direct labor and $4,000 for electric power. Total fixed costs are $23,000. At 9,000 units of production, a flexible budget would show:


A) variable costs of $49,500 and $25,875 of fixed costs

B) variable costs of $44,000 and $23,000 of fixed costs

C) variable costs of $49,500 and $23,000 of fixed costs

D) variable and fixed costs totaling $75,375


solution:  40000+4000 = 44000 / 8000 = 5.50 x 9000 = 49,500 variable, fixed cost is the same



3. The production budgets are used to prepare which of the following budgets?


A) Operating expenses

B) Direct materials purchases, direct labor cost, factory overhead cost

C) Sales in dollars

D) Sales in units


4. Principal components of a master budget include which of the following?


A) Production budget

B) Sales budget

C) Capital expenditures budget

D) All of the above


5. The first budget customarily prepared as part of an entity’s master budget is the:


A) production budget

B) cash budget

C) sales budget

D) direct materials purchases


6. Pipe Fitters Co. has beginning inventory of 10,000 units. Sales are expected to be 30,000 units. The required ending inventory is 8,000 units. How many units must be produced?


A) 28,000

B) 30,000

C) 32,000

D) 48,000


7. Preparation of a cash budget takes all but which of the following into consideration?


A) Depreciation expense

B) Cash received from customers

C) Inventory payments

D) Payments to suppliers


8. Calculating fixed unit manufacturing costs results in


A) Constant unit costs as production increases

B) Constant unit costs as production decreases

C) Increasing unit costs as production increases

D) Increasing unit costs as production decreases


9. Which of the following is not a benefit of budgeting?


A) A budget communicates expected outcomes.

B) A budget assists in creating specific goals and objectives.

C) A budget establishes benchmarks to measure success.

D) A budget guarantees a net income for the company.


10. Determine the expected annual sales for the sales budget. Units sell at $8 each. Estimated sales are as follows: First quarter 10,000 units, second quarter 15,000 units, third quarter 20,000 units and fourth quarter 30,000 units.


A) $600,000

B) $240,000

C) $800,000

D) $750,00


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