Chapter 14 Self-test questions

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. 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?

£17,500 overdrawn correct incorrect

£12,500 overdrawn correct incorrect

£12,500 positive balance correct incorrect

£17,500 positive balance correct incorrect

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

Rewarding the achievement of challenging targets. correct incorrect

Checking progress towards achieving targets and objectives. correct incorrect

Regular comparison of budgeted and actual outcomes. correct incorrect

Investigating the causes of variations between budgeted and actual outcomes. correct incorrect

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. A budget is the expression of a _______________ terms.

Your response

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

True correct incorrect

False correct incorrect

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. 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.

Select an answer choice Planning Motivation Coordination and integration Communication Control Responsibility

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Challenging targets.

Select an answer choice Planning Communication Responsibility Coordination and integration Control Motivation

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

Select an answer choice Coordination and integration Responsibility Communication Planning Control Motivation

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Looking ahead.

Select an answer choice Motivation Responsibility Control Communication Coordination and integration Planning

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Investigation of differences between actual and budgeted results.

Select an answer choice Control Planning Communication Motivation Coordination and integration Responsibility

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

Select an answer choice Coordination and integration Motivation Responsibility Communication Planning Control

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

Budgeted expenditure on employee salaries. correct incorrect

Budgeted expenditure on a new delivery van. correct incorrect

Budgeted receipts from the issue of share capital. correct incorrect

Budgeted repayment of a bank loan. correct incorrect

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

Uses spreadsheets to perform "what if" calculations. correct incorrect

Relaxes the assumptions on which the original budgets were based. correct incorrect

Is carried out during the comparison of actual and budgeted results. correct incorrect

Assesses how profits and cash flows will turn out if certain expectations are changed. correct incorrect

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. 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.

Your response

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. 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.

True correct incorrect

False correct incorrect

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. 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.

A decrease in the actual selling price of products compared to the budgeted selling price of products without a corresponding decrease in the actual costs of producing those goods. correct incorrect

An increase in actual expenditure on non-current assets compared to budgeted expenditure on non-current assets. correct incorrect

A more productive workforce than budgeted. correct incorrect

An increase in the actual cost of raw materials compared to the budgeted cost of raw materials without a corresponding increase in the actual selling price of goods produced. correct incorrect

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. 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.

True correct incorrect

False correct incorrect

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. 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?

£42,100 correct incorrect

£47,350 correct incorrect

£52,400 correct incorrect

£57,650 correct incorrect

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

Different parts of the budget are delegated to different managers. correct incorrect

Managers work as a team. correct incorrect

Managers are challenged to achieve more and are rewarded with bonuses for meeting their targets. correct incorrect

Managers are assessed on their ability to meet their agreed objectives. correct incorrect

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. 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?

£177,000 correct incorrect

£190,000 correct incorrect

£194,500 correct incorrect

£195,000 correct incorrect

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. 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?

£6,400 correct incorrect

£6,410 correct incorrect

£6,500 correct incorrect

£7,500 correct incorrect