Chapter 14 Self-test questions

Budgeting
. Boris runs a small manufacturing operation, producing and selling machine parts to European companies. At the start of April, his bank account had an overdrawn bank balance of £2,500. His bank has asked him to produce a budgeted bank balance for the end of April. Boris estimates that his customers will pay him £41,000 of what is owed while he will pay his suppliers £26,000 during the month. What is Boris's budgeted bank account balance at the end of April?

. Which of the following describe the control aspect of the budgeting process? Please select all that apply.

. A budget is the expression of a _______________ terms.

. The first stage in the budgeting process is to set the monthly sales budget.

. Budgets perform planning, communication, coordination and integration, control, responsibility and motivation functions. Which function do you associate with each of the following words and phrases?

Delegating different parts of the budget to different managers.

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Challenging targets.

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Enabling different departments to work together effectively to achieve organizational goals.

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Looking ahead.

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Investigation of differences between actual and budgeted results.

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Relays information to those departments and individuals involved in achieving objectives.

. Which one of the following will appear in the cash budget but not in the budgeted statement of financial position of a limited company?

. Which of the following statements accurately describe sensitivity analysis? Please select all that apply.

. When sales are made on credit, there is a _________ between the date of the sale and the day on which cash from that sale is received.

. Budgeted cash receipts in the month – budgeted cash payments in the month – budgeted cash at the start of the month = budgeted cash at the end of the month.

. Which of the following would be expected to result in a reduction in actual net profit compared to budgeted net profit in an accounting period? Please select all that apply.

. Budgeted payments for expenses in the cash budget are allocated to the months in which the payments are made not to the months in which the expenses are incurred.

. Budgeted trade receivables at the start of the financial year are £52,500. The sales budget shows total credit sales for the year of £275,600 and the cash budget shows cash receipts from credit sales for the year of £280,750. Irrecoverable debts in the statement of profit or loss are budgeted to be £5,250 for the year. What is the figure for trade receivables that will appear in the budgeted statement of financial position at the end of the financial year?

. Which of the following describe the responsibility aspect of budgeting? Please select all that apply.

. BB Limited is preparing its budget for next year. Sales are all on credit. The company expects that customers will pay 15% of what is owed in the month sales are made, 65% in the month after sales are made and 20% two months after sales are made. The sales budget shows budgeted sales of £150,000 in March, £180,000 in April, £200,000 in May and £190,000 in June. What cash receipts from sales should BB Limited allocate to the cash budget for June?

. Suzie makes and sells artisan bread. She is setting her budgets for the coming year. Her budgeted selling price for each loaf of bread is £4.00 and she expects to sell 5,000 loaves in June. Her budgeted ingredients for each loaf of bread cost £2.00 and power for baking is budgeted to cost £0.50 per loaf. A new oven is scheduled for purchase in May. The new oven's budgeted cost is £6,000 and it is expected to be used in the baking of bread for 5 years and to have a resale value of £600 at the end of 5 years. Suzie depreciates her property, plant and equipment on the straight-line basis. Business overheads for June are budgeted to be £1,000. What is Suzie's budgeted net profit for June?

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