1. Which of the following is true? a) The direct materials purchase budget is determined from the direct labour budget. b) The only budget providing input into the revenue budget is the sales budget. c) The direct materials purchase budget and the capital expenditures budget are both determined from the production budget. d) The selling and administrative expense budget is input into the forecasted cost of goods sold.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
1. Which of the following is true?
a) The direct materials purchase budget is determined from the direct labour
budget.
b) The only budget providing input into the revenue budget is the sales budget.
c) The direct materials purchase budget and the capital expenditures budget
are both determined from the production budget.
d) The selling and administrative expense budget is input into the
cost of goods sold.
2. Which of the following describes decision making at the tactical or
functional level?
a) Senior management will need to make long-term decisions about the
future of the whole business. Therefore, strategic decisions will be made
about which markets the business is to operate in, whether to bid to take
over a competitor, etc.
b) These decisions are made in focusing on the medium-term future of the
business, say looking at the 12-18-month pricing strategy for a product,
deciding what products to stock over the summer months, etc. They
tend to be focused on particular business units or departments.
c) These decisions focus largely on the day-to-day running of the
business and may be made by lower-level managers, say at the branch
level. They may concern inventory levels, staffing rotas, etc.
d) None of the above
4. For years one through five, a proposed expenditure of £350,000 on a noncurrent asset with an estimated useful life of five years is expected to generate
net profits of £80,000, £80,000, £80,000, £80,000, and £30,000, respectively,
and net cash flows of £100,000, £85,000, £85,000, £80,000, and £75,000,
respectively. The payback period is:
a. Five years
b. Four years
c. Three years
d. None of the above
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