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Name_______________________________________
Acctg 202

Choose the best answer. 

1. A formal budget program will almost always result in: 
A) higher sales. 
B) more cash inflows than cash outflows. 
C) decreased expenses. 
D) improved profits. 
E) a detailed plan against which actual results can be compared. 

2. A budget serves as a benchmark with which: 
A) actual results can be compared. 
B) allocated results can be compared. 
C) actual results become inconsequential. 
D) allocated results become inconsequential. 
E) cash balances can be compared to expense totals. 

3. Wilson Corporation is budgeting its equipment needs on an on-going basis, with a new quarter being added to the budget as the current quarter is completed. This type of budget is most commonly known as a: 
A) capital budget. 
B) rolling budget. 
C) revised budget. 
D) pro-forma budget. 
E) financial budget. 

4. A company's sales forecast would likely consider all of the following factors except: 
A) political and legal events. 
B) advertising and pricing policies. 
C) general economic and industry trends. 
D) top management's attitude toward decentralized operating structures. 
E) competition. 

5. Which of the following organizations would be least likely to use budgets? 
A) Manufacturing firms. 
B) Merchandising firms. 
C) Firms in service industries. 
D) Nonprofit organizations. 
E) None of the above, as all are equally likely to use budgets. 

6. Santa Fe Corporation has a highly automated production facility. Which of the following correctly shows the two factors that would have the most direct influence on the company's manufacturing overhead budget? 
A) Sales volume and labor hours. 
B) Contribution margin and cash payments. 
C) Production volume and management judgment. 
D) Labor hours and management judgment. 
E) Management judgment and indirect labor cost. 

7. Donovan plans to sell 75,000 units of product no. 675 in May, and each of these units requires five units of raw material. Pertinent data follow.

  Product No. 675 Raw Material
Actual May 1 Inventory

12,000 units

24,000 units

Desired May 31 Inventory

15,000 units

20,000 units

On the basis of the information presented, how many units of raw material should Donovan plan to purchase? 
A) 356,000. 
B) 364,000. 
C) 386,000. 
D) 394,000. 
E) None of the above. 

8. The budgeted income statement, budgeted balance sheet, and budgeted statement of cash flows comprise: 
A) the final portion of the master budget. 
B) the depiction of an organization's overall actual financial results. 
C) the first step of the master budget. 
D) the portion of the master budget prepared after the sales forecast and before the remainder of the operational budgets. 
E) the second step of the master budget. 

9. When an organization involves its many employees in the budgeting process in a meaningful way, the organization is said to be using: 
A) budgetary slack. 
B) participative budgeting. 
C) budget padding. 
D) imposed budgeting. 
E) employee-based budgeting. 

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