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Reviewer in Budgeting-Part 2

The document discusses various budgeting methods, including zero-based budgeting, flexible budgeting, and profit planning, highlighting their characteristics and advantages. It poses questions about the true statements regarding zero-based budgeting, the sequence of budget preparation, and the identification of functional budgets. Additionally, it addresses cash flow considerations and the impact of certain transactions on cash balances.

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Maria Alegria
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14 views3 pages

Reviewer in Budgeting-Part 2

The document discusses various budgeting methods, including zero-based budgeting, flexible budgeting, and profit planning, highlighting their characteristics and advantages. It poses questions about the true statements regarding zero-based budgeting, the sequence of budget preparation, and the identification of functional budgets. Additionally, it addresses cash flow considerations and the impact of certain transactions on cash balances.

Uploaded by

Maria Alegria
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Program budgeting.​ c.​ Line budgeting.

b.​Zero-based budgeting.​ d.​Flexible budgeting.

1.​ A systematized approach known as zero-based budgeting (ZBB)


a.​Presents planned activities for a period of time but does not
present a firm commitment.
b.​Divides the activities of individual responsibility centers into a
series of packages that are prioritized.
c.​ Classifies the budget by the prior year’s activity and estimates
the benefits arising from each activity.
d.​Commences with the current level of spending.

2.​In zero-based budgeting, which of the following statements


is/are true?
1.​ All activities in the company are organized into break-up units
called packages.
2.​All costs have to be justified every budgeting period.
3.​The process is not time consuming since justification of costs
can be done as a routine matter.
a.​All three statements.​ c.​ Statement 1 only.
b.​Statements 1 and 2 only.​ d.​Statement 2 and 3 only.

3.​A budget that is expressed in units of materials, number of


employees, or number of man-hours or service units rather than
in pesos is known as
a.​Planning budget ​ b.​Progressive budget​c.​
Physical budget ​ d.​Traditional budget

4.​Which of these statements are advantages of profit planning?


1.​ Develops profit-mindedness, encourages cost consciousness
and resources utilization throughout the company.
2.​Provides vehicle to communicate objectives, gain support for
the plan, of what is expected, thereby developing a sense of
commitment to achieve established goals.
3.​Provides yardstick to evaluate actual performance;
encouraging efficiency, increasing output and reducing cost.
4.​Provides a sense of direction for the company and enhances
coordination of business activity.
5.​Eliminates or takes over the role of administration by providing
detailed information that allows executives to operate toward
achievement of the organization’s objectives.
a.​Statements 3, 4, and 5 only.​ c.​ Statements 1, 3, and 4 only.
b.​All five statements.​ d.​Statements 1, 2, 3, and 4 only.

5.​For a company that does not have resource limitations in what


sequence would the budgets be prepared?
1.​ cash budget​ 4.​production budgets
2.​sales budget​ 5.​purchase budgets
3.​inventory budgets
a.​sequence 2, 3, 4, 5 and 1​ c.​ sequence 2, 4, 3, 5 and 1
b.​sequence 2, 3, 4,1 and 5​ d.​sequence 4, 3, 2, 1 and 5

6.​A budget that identifies revenues and costs with an individual


controlling their incurrence is
a.​Master budget​ c.​ Responsibility budget
b.​Product budget​ d.​None of the above

7.​If a company has a policy of maintaining an inventory of finished


goods at a specified percentage of the next month's budgeted
sales, budgeted production for January will exceed budgeted
sales for January when budgeted
a.​February sales exceed budgeted January sales.
b.​January sales exceed budgeted December sales.
c.​ January sales exceed budgeted February sales.
d.​December sales exceed budgeted January sales.

8.​A company that maintains a raw material inventory, which is


based on the following month's production needs, will purchase
less material than it uses in a month where
a.​sales exceed production.
b.​production exceeds sales.
c.​ planned production exceeds the next month's planned
production.
d.​planned production is less than the next month's planned
production.

9.​Which of the following is not a functional budget?


a.​Research and development budget​ c.​ Cash budget
b.​Purchasing budget​ d.​Direct labor cost

10.​ By the end of this year you expect to have a cash balance of
P500,000. Which of these transactions/indicators (not
considered in your estimate) will reduce this balance?
a.​A modification on credit terms to customers will reduce credit
sales.
b.​A dialogue with key suppliers will allow discounts on extended
payment terms.
c.​ A new machine will be bought with proceeds from a bank loan
that will carry a 17% interest per annum and monthly payments
over 2 years.
d.​The ratio of current trade receivables to total receivables will
decrease.
11.​Information not shown in the cash budget but needed in the
preparation of the statement of operations for the period

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