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Why do firms prepare budgets?
A. To allocate expenditures randomly
B. To provide a quantitative basis for planning
C. To avoid taxation
B. To provide a quantitative basis for planning
One benefit of budgeting is:
A. The complete elimination of uncertainty
B. The ability to highlight potential problems
C. A guaranteed profit
B. The ability to highlight potential problems
The operating cycle of a retail business generally begins with:
A. Purchasing merchandise
B. Providing services
C. Paying wages
A. Purchasing merchandise
The operating cycle of a service business generally begins with:
A. Procuring inventory
B. Delivering services
C. Selling goods
A. Procuring inventory
If a company’s sales fluctuate due to seasonal patterns, which budget best reflects this variation?
A. Quarterly profit budget
B. Seasonal sales budget
C. Investment budget
B. Seasonal sales budget
Q7. In a retail enterprise, which budget primarily determines how much inventory should be purchased in the future?
A. Purchases budget
B. Selling and distribution expenses budget
C. Cash budget
A. Purchases budget
A selling and distribution expenses budget usually includes:
A. Advertising costs and sales staff salaries
B. Depreciation of factory machinery
C. Bank interest expenses
A. Advertising costs and sales staff salaries
Which budget accounts for both cash inflows and outflows, ensuring that the enterprise avoids liquidity shortages?
A. Purchases budget
B. Cash budget
C. Sales budget
B. Cash budget
Which financial statement forms part of the master budget?
A. Projected income statement
B. Historical financial statements
C. Cost allocation statement
A. Projected income statement
“Management by exception” refers to:
A. Managers focusing only on items with significant variances from the budget
B. Managers preparing budgets themselves
C. Managers disregarding budgets entirely
A. Managers focusing only on items with significant variances from the budget
In variance analysis, if actual expenses exceed budgeted expenses, this is referred to as:
A. A favorable variance
B. An unfavorable variance
C. No variance
B. An unfavorable variance
Why do firms prepare a projected income statement?
A. To forecast future profitability
B. To display cash flows
C. Solely for government compliance
A. To forecast future profitability
The principal difference between the operating cycles of retail and service firms is that:
A. Retailers require inventories, whereas service firms do not
B. Service firms require larger manufacturing facilities
C. Retail firms incur no selling expenses
A. Retailers require inventories, whereas service firms do not
The best definition of Contribution Margin is:
A. Sales revenue minus cost of goods sold (COGS).
B. Sales revenue minus all variable costs.
C. Sales revenue minus all fixed costs.
D. Operating profit plus depreciation expense
B. Sales revenue minus all variable costs.
The role of a master budget is to:
A. Serve only for tax reporting
B. Function as a comprehensive financial planning framework that integrates sales, purchases, cash, and expense budgets
C. Focus exclusively on the financial plans of individual departments
B. Function as a comprehensive financial planning framework that integrates sales, purchases, cash, and expense budgets