Chapter 12 Multiple-choice questions

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. Which is the mostly likely purpose of budgeting?

Planning and control of an organization' s income and expenditure correct incorrect

Preparation of a five-year business plan correct incorrect

Company valuation correct incorrect

Assess the non-financial performance of an organization correct incorrect

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. Which of the following budgets would not form part of the master budget?

Cash budget correct incorrect

Statement of profit or loss correct incorrect

Sales budget correct incorrect

Statement of financial position correct incorrect

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. Which of the following is not a functional budget?

Labour budget correct incorrect

Cash budget correct incorrect

Materials budget correct incorrect

Expenses budget correct incorrect

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. A crockery company makes china cups and saucers. How much clay would they need to buy if:
- a cup uses 100g of clay
- a saucer uses 150g of clay
- it plans to make 450,000 cups and 280,000 saucers
- there is no opening inventory
- it would like to have closing inventories of 4,000kg of clay?

83,000kg correct incorrect

99,500kg correct incorrect

87,000kg correct incorrect

91,000kg correct incorrect

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. Calculate the production budget from the following data: sales 89,350 units; opening inventory 23,864 units; closing inventory 33,156 units.

80,058 units correct incorrect

146,370 units correct incorrect

32,330 units correct incorrect

98,642 units correct incorrect

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. A business plans to make 15,000 coats per annum, each taking the 1.5 direct labour hours. If the direct labour rate is $8 per hour and a pay rise of 15% is awarded halfway through the year, what is the total annual direct labour budget?

$120,000 correct incorrect

$193,500 correct incorrect

$180,000 correct incorrect

$207,000 correct incorrect

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. What is meant by an incremental budget?

A budget prepared from first principles correct incorrect

The variable elements of a budget, excluding fixed costs correct incorrect

A budget that is based on the previous year, adjusted for known changes correct incorrect

A budget that breaks even correct incorrect

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. Which of the following statements can be considered to be an advantage of a bottom-up budget?

Uses the knowledge of all staff to build a fair budget correct incorrect

The cheapest method of producing a budget correct incorrect

Reduces the level of budget negotiation between staff correct incorrect

Prevents slack being built into budgets correct incorrect

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. A firm has produced the following budget for an activity level of 200,000 units:





What would be the total cost for a level of activity of 225,000 units?

€133,875 correct incorrect

€148,500 correct incorrect

€125,889 correct incorrect

€138,875 correct incorrect

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. What would be the most likely cause of an unfavourable labour rate variance together with a favourable labour efficiency variance?

The employment of more highly skilled staff than budgeted correct incorrect

Poor wage negotiation by the Human Resources manager correct incorrect

The employment of less well-trained staff than intended correct incorrect

Improved production efficiencies correct incorrect