1. The Mentha company currently has the following statistics:
Days in accounts receivable 68
Operating cycle 148
What is Mentha’s days in inventory?
| A | 80. |
| B | 68. |
| C | 148. |
| D | Cannot be determined from the information given. |
2. Lamberton Manufacturing Company has just completed its master budget. The budget indicates that the company’s operating cycle needs to be shortened. Thus, the company will likely attempt:
| A | Stocking larger inventories. |
| B | Reducing cash discounts for prompt payment. |
| C | Tighten credit policies. |
| D | None of the above selections is correct. |
3. Which of the following is not a potential benefit of using budgets?
| A | Enhanced coordination of firm activities. |
| B | More motivated managers. |
| C | More accurate external financial statements. |
| D | Improved interdepartmental communication. |
4. Which of the following is considered a financial budget estimate?
| A | The manufacturing cost budget. |
| B | The cost of goods sold budget. |
| C | The operating expense budget. |
| D | The prepayments budget. |
5. Benefits derived from budgeting do not include:
| A | Improved relationship with shareholders. |
| B | Enhanced management responsibilities. |
| C | Improved coordination of activities. |
| D | Enhanced performance evaluations. |
6. Flexible budgeting may be used for profit centers by applying cost volume profit relationships to the actual level of:
| A | Units produced. |
| B | Resources consumed. |
| C | Costs incurred. |
| D | Sales achieved. |
7. If the volume of output of a factory for the month of June is 50,000 units, while the budgeted output was 40,000 units:
| A | Comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget. |
| B | Actual fixed costs per unit may be expected to exceed budgeted levels. |
| C | Actual cost per unit will be higher than standard cost per unit. |
| D | Both total production costs and unit production costs should be approximately 25% above budgeted levels. |
8. A cash budget is affected directly by each of the following except:
| A | A capital expenditures budget. |
| B | A sales forecast. |
| C | A manufacturing cost budget. |
| D | A budgeted income statement. |
9. The most widely used budgeting philosophy is the:
| A | Operational approach. |
| B | Behavioral approach. |
| C | Strategic approach. |
| D | Tactical approach. |