Practice Test

Q1) Which of the following is / are true with regard to the period of budget ?
(i) The budget period depends on the nature of industry
(ii) Master budget is prepared annually, while functional budgets may be for different periods
(iii) Basic budget is the long term budget
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Q2) Which of the following statements is / are true with regard to flexible budgeting ? Show Answer

Q3) The classification of fixed and variable cost has a special significance in the preparation of Show Answer

Q4) When a flexible budget is used, then increase in the actual production level within a relevant range would increase Show Answer

Q5) When a flexible budget is used, a decrease in the actual production level within a relevant range would Show Answer

Q6) If the activity level is reduced from 80% to 70%, the fixed cost Show Answer

Q7) Which of the following are purposes of a budget?
(i) Establishing strategic options
(ii) Motivating management
(iii) Establishing long term objectives
(iv) Planning operations
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Q8) Which of the information below should be contained in a budget manual? Show Answer

Q9) A budget that gives a summary of all the functional budgets is known as Show Answer

Q10) A master budget comprises Show Answer

Q11) A master budget comprises the Show Answer

Q12) Which of the following is normally the most appropriate sequence of events in the preparation of the indicated budgets ? Show Answer

Q13) When preparing a production budget, the quantity to be produced equals: Show Answer

Q14) Which one of the following items would NOT be included in a cash budget? Show Answer

Q15) Which of the following items should be included in a cash budget?
(i) loan repayments (ii) depreciation charge
(iii) tax provision (iv) wages paid
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Q16) The CIMA definition of zero-based budgeting is set out below, with two blank sections.
“Zero-based budgeting: A method of budgeting which requires each cost element _______, as though the activities to which the budget relates ______.”
Which combination of two phrases correctly completes the definition?
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Q17) A company estimates its direct material requirements for the month of November 2014 to be
Rs. 2,40,000 and the direct labour to be Rs. 1,50,000. It is the policy of the company to absorb overheads as under :
Factory overheads - 60% of direct wages
Administrative overheads - 20% of works cost
Selling and distribution overheads - 25% of works cost
It is estimated that the selling and distribution overheads will increase by 15% in November 2014. The company sells goods at a profit of 16.67% on sales.
The budgeted sales for the month of November 2014 is
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Q18) A company is preparing a production budget for the next year. The following information is relevant:
Budgeted Sales 10,000,
units Opening stock 600 units,
Closing stock 5% of budgeted sales,
The production process is such that 10% of the units produced are rejected.
What is the number of units required to be produced to meet demand ?
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Q19) ABC Ltd. uses the following flexible budget formula for annual maintenance cost : Total cost = Rs. 6,720 + Rs. 0.64 per machine hour
The current month's budget is based on 20,000 hours of planned machine time. The maintenance cost included in this flexible budget for the current month is
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Q20) The budgeted cost of electricity is Rs. 62,500 for 5,000 units of production per month and Rs. 71,500 for 6,200 units of production per month. If the company manufactures 6,900 units in the month of May 2014, the budgeted amount of electricity for the month is Show Answer

Q21) The following details have been extracted from the debtor collection records of X Limited :
Invoices paid in the month after sale - 60%
Invoices paid in the second month after sale - 20%
Invoices paid in the third month after sale 15%
Bad debts - 5%
Credit sales for June to August 2014 are budgeted as follows :
June - Rs. 1,00,000
July - Rs. 1,50,000
August - Rs. 1,30,000

Customers paying in the month after sale are entitled to deduct a 2% cash discount. Invoices are issued on the last day of the month. The amount budgeted to be received in September 2014 from credit sales is
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Q22) One of the following is not a basic element of a budget: Show Answer

Q23) Information to prepare flexible budget includes : Show Answer

Q24) The scarce factor of production is known as : Show Answer

Q25) Flexible budgets are useful for Show Answer

Q26) A budget is expressed in Show Answer

Q27) Which of the budget is prepared for a long period of time Show Answer

Q28) A flexible budget takes into account Show Answer

Q29) Master budget is a summary of Show Answer

Q30) A budget is prepared for Show Answer

Q31) Budget period depends on Show Answer

Q32) The object of budgetary control is Show Answer

Q33) Following is the benefit of budgetary control Show Answer

Q34) Budgetary control system is costly for Show Answer

Q35) Following is the essence of budgetary control Show Answer

Q36) Budget Manual is a Show Answer

Q37) Performance for any organisation depends on Show Answer

Q38) Sales budget shows Show Answer

Q39) Production budget is expressed in Show Answer

Q40) Capital expenditure budget is Show Answer

Q41) The budget which helps to plan and control cash is Show Answer

Q42) The budget which is dynamic is Show Answer

Q43) The budget which covers all the functional budget is Show Answer

Q44) Production cost budget shows Show Answer

Q45) Budget is prepared for the future period. Show Answer

Q46) A Financial statement, prepared and approved prior to a defined period of time is known as interim financial statement. Show Answer

Q47) Master Budget is a Budget which is designed to remain unchanged irrespective of the level of capacity. Show Answer

Q48) Flexible Budget is the summary Budget incorporating its component functional Budgets. Show Answer

Q49) Functional Budget is a budget which, by recognizing the difference between fixed, semi-fixed and variable cost, is designed to change in relation to the level of activity attained. Show Answer

Q50) Current Budget is a Budget which is established for use unaltered over a long period of time. Show Answer

Q51) Functional Budget is a Budget which is established for use over a short period of time Show Answer

Q52) Fixed Budget refers to budget for fixed assets. Show Answer

Q53) The process of creating a formal plan and translating goals into a quantitative format is Process costing. Show Answer

Q54) Budget is a statement of the policy to be pursued for the purpose pursued for the purpose of attaining a given objective. Show Answer

Q55) Flexible budgeting is a system of budgeting under which budgets are recast quickly for changes in the volume of activity. Show Answer

Q56) Flexible budgeting involves a careful differentiation between fixed and variable expenses. Show Answer

Q57) A flexible budget is a budget which, by recognizing different cost behavior patterns, is designed to change as volume of activity changes. Show Answer

Q58) A flexible budget is a budget which is prepared for a rolling period which is reviewed monthly and updated accordingly. Show Answer

Q59) A flexible budget is a budget for semi-variable overhead costs only. Show Answer

Q60) The basic difference between a fixed budget and a flexible budget is that a fixed budget is a budget for a single level of an activity, while a flexible budget consists of several budget based on different activity levels. Show Answer

Q61) A master budget comprises the budgeted income statement, budget balance sheet and budgeted cash flow only. Show Answer

Q62) Sales budget provides the necessary input data for the Direct Labour Budget. Show Answer

Q63) The zero-based budget forces management to rethink each phase of an organization’s operations before allocating resources. Show Answer

Q64) The scarce factor of production is known as key factor. Show Answer

Q65) Flexible budget is drawn for one level of activity. Show Answer

Q66) Fixed budget is drawn for multiple levels of activities. Show Answer

Q67) A Budget is expressed in financial terms only. Show Answer

Q68) Capital expenditure budget is prepared for a longer period. Show Answer

Q69) Master budget is a summary of all the functional budget. Show Answer

Q70) Budget period depends on management policy. Show Answer

Q71) Budgetary control is costly for small organizations. Show Answer

Q72) Budget manual is budget prepared manually. Show Answer

Q73) Sales budget shows estimate of future sales. Show Answer

Q74) Production budget is expressed in quantity and cost. Show Answer

Q75) Cash Budget shows budgeted receipts and payments. Show Answer

Q76) Flexible budget is dynamic. Show Answer

Q77) Production cost budget shows budgeted cost of production. Show Answer

Q78) Sales budget is prepared by production management. Show Answer

Q79) Flexible budget is useful for control of performance. Show Answer

Q80) Budget defines the responsibility of a concerned manager. Show Answer