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Em The budgetary process , 34 mins

16,1 A master budget comprisesA the budgeted income statementB the budgeted cash flow, budgetedincome statement and budgetedstatement of financial positionC the budgetedcash flowD the entire set of budgetsprepared (2 marks)

16,2 Which of the following is not a functional budget?A Production budgetB Distribution cost budgetC Selling cost budgetD Cash budget (2 marks)

16,3 If a companyhas no productionresourcelimitations, in which orderwould the following budgetsbe prepared?1 Material usagebudget 4 Finishedgoods inventory budget2 Sales budget 5 Production budget3 Material purchase budget 6 Material inventory budgetABCD

5,4,1,6,3,22,4,5,1,6,32,4,5,1,3,62, 5, 4, 1, 6, 3 (2 marks)

16.4 In a situation where there are no production resource limitations, which of the following items ofinformation must be available for the production budget to be completed?1 Salesvolume from the sales budget2 Material purchasesfrom the purchasesbudget3 Budgeted change in finished goods inventory4 Standard direct labour cost per unitA 1,2 and 3B 1,3 and 4C 1 and 3D All of them (2 marks)

16.5 When preparing a production budget, the quantity to be produced equalsA sales quantity + opening inventoryof finished goods + closing inventory of finished goodsB sales quantity - opening inventoryof finished goods + closing inventoryof finished goodsC sales quantity - opening inventory of finished goods- closing inventory of finished goodsD sales quantity + opening inventory of finished goods- closing inventoryof finished goods

(2 marks)

16,6 The quantity of material in the material purchases budget is greater than the inferredfrom quantity ofmaterial in the material usagebudget. Which of the following statements can be this situation?A Wastageof material occurs in the production processB Finished goods inventories are budgeted to increaseC Raw materials inventories are budgetedto increaseD Raw materials inventoriesare budgetedto decrease (2 marks)

16.7 A company plans to sell 24,000 units of product R next year. Opening inventoryof R Is expectedto be2,000 units and PQ Co plans to IncreaseInventory by 25 per cent by the end of the year, How manyunits of product R should be produced next year?A 2j,bOU unitsB 24,000 unitsC 24,500 unitso 30,000 units (2 marks)

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16.8 Each unit of product Alpha requires 3 kg of raw material. Next-month's production budget for productAlpha is as follows.Opening inventories:

Raw materialsFinished units of Alpha

Budgeted sales of AlphaPlanned closing inventories:

15,000 Kg2,000 units'60,000 units

Raw materialsFinished units of Alpha

7,000 kg3,000 units

The number of kilograms of raw materials that should be purchased next month is:A 172,000B 175,000C 183,000D 191,000 (2 marks)

16.9 Budgeted sales of X for December are 18,000 units. At the end of the production process for X, 10% ofproduction units are scrapped as defective. Opening inventories of X for December are budgeted to be15;,000 units and closing inventories will be 11,400 units. All inventories of finished goods must havesuccessfully passed the quality control check. The production budget for X for December, in units isA 12,960B 14,400C· 15,840D 16,000 (2 marks)

16.10 A company manufactures a single product, M. Budgeted production output of product M during Augustis 200 units. Each unit of product M requires 6 labour hours for completion and PR Co anticipates 20per cent idle time. Labour is paid at a rate of $7 per hour. The direct labour cost budget for August isA $6,720 C $10,080

, B $8,400 D $10,500 (2 marks)

. . . 16.11 Each unit of product Echo takes five direct labour hours to make. Quality standards are high, and 8% of, < units are rejected after completion as sub-standard: Next month's budgets are as follows.

Opening inventories of finished goodsPlanned closing inventories of finished goods .Budgeted sales of Echo

3,000 units7,600 units

36,800 unitsAll inventories of finished goods must have siJccessfully passed the quality control check.What is the direct labour hours budget for the month?A 190,440 hours ,B 207,000 hoursC 223,560 hoursD 225,000 hours (2 marks)

16.12 Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour hours tomake. Labour is paid $10 per hour. Idle,time represents 20% of the total labour time.What is the budgeted total labour cost for the next period?A $192,000 C $288,000B $240,000 D $300,000 (2 marks)

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,16,13Whlch of the following statements are true?

1 A flexible budget allows businesses to evaluate a manager's performance more fairly2 A fixed budget is useful for defining the broad objectives of the organisation3 Relying on fixed budgets alone would.usually give rise to massive variances

A8CD

1 and 3 only1 and 2 only2 and 3 only1,2 and 3 (2 marks)

16.14 Which of the following statements are true?

1 Flexed budgets help managers to deal with uncertainty2 Flexed budgets allow a more meaningful comparison to the made with actual results

ABCD

1 is true and 2 is false2 is true and 1 is false1 and 2 are true1 and 2 are false (2 marks)

(Total = 28 marks)

ED Making budgets work 14 mins

17.1 Participation by staff in the budgeting process is often seen as an aid to the creation of a realistic budgetand to the motivation of staff. There are, however, limitations to the effectiveness of such participation.

Which of the folloWing illustrates one of these limitations

A Participation allows staff to buy into the budgetB Staff suggestions may be ignored leading to de-motivationC Staff suggestions may be based on local knowledgeD Budgetary slack can be built in by senior manager as well as staff (2 marks)

17.2 Which of the following statements about budgeting and motivation are true?

A target Is more motivating than no target at allThe problem with a target is setting an appropriate degree of difficultyEmployees who are challenged tend to withdraw their commitment.

All of them2 and 3 only1 and 2 only3 only (2 marks)

17.3 Which of the following best describes a top-down budget?

A A budget which has been set by scaling down individual expenditure items until the totalbudgeted expenditure can be met from available resources

A budget which is set by delegating authority from top management, allowing budget holders toparticipate in setting their own budgets

A budget which is set without permitting the ultimate budget holder to partiCipate in thebudgeting process

A budget which is set within the framework of strategic plans determined by top management(2 marks)

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C

D

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