1		Which of the following best describes the basic planning relationship?
			A)	Long-term plans are more specific than short-term plans.
			B)	Short-term plans are more specific than long-term plans.
			C)	Both short-term and long-term plans must be quite specific.
			D)	Short-term plans are more general than long-term plans.
2		The three levels of planning for business activity include all of the following except
			A)	strategic planning.
			B)	capital budgeting.
			C)	operations budgeting.
			D)	financial planning.
3		Which of the following directs the firm's short-term activities by stating objectives using specific quantities?
			A)	Participative budget
			B)	Capital budget
			C)	Master budget
			D)	Objective budget
4		A budgeting process in which information is constantly updated to provide a glance at a future 12-month period is referred to as:
			A)	continuous budgeting.
			B)	participative budgeting.
			C)	constant budgeting.
			D)	joint budgeting.
5		Which of the following advantages of budgeting relates to formalizing management’s plans and communicating management’s objectives to the rest of the organization?
			A)	Planning
			B)	Coordination
			C)	Performance measurement
			D)	Corrective action
6		Involving personnel at all different levels of the organization in the budgeting process in order to develop more realistic targets is called
			A)	perpetual budgeting.
			B)	cooperative budgeting.
			C)	participative budgeting.
			D)	realistic budgeting.
7		The master budget usually includes all of the following except
			A)	operating budgets.
			B)	standard budgets.
			C)	capital budgets.
			D)	pro forma financial statements.
8		Which of the following is not an operating budget?
			A)	Sales budget
			B)	Capital budget
			C)	Inventory purchases budget
			D)	Cash budget
9		The preparation of the master budget begins with the
			A)	sales budget.
			B)	sales forecast.
			C)	expected net income.
			D)	ending cash balance.

Use the following information to answer questions 10 through 16.

Baird Company has provided the following information for preparing the upcoming year’s master budget.

	September	October	November	December	January
Sales	$280,000	$300,000	$320,000	$360,000	$200,000
Cost of goods sold	112,000	120,000	128,000	144,000	80,000

Baird expects 75% of its sales to be credit sales. Credit sales are collected as follows: 60% in the month of sale, 30% in the month following the sale with the final 10% being uncollectible and written off (using the allowance method) in the month following the sale.

Desired ending inventory is 25% of the following month’s projected cost of goods sold. Baird purchases its inventory on account. 70% of inventory purchases are paid in the month of acquisition and 30% is paid in the month following purchase.

Projected monthly selling and administrative expenses (paid in cash in the month incurred) are as follows:

Salaries	60,000
Depreciation	10,000
Rent	20,000
Utilities	6,000
Other	5,000

In addition, commissions are 2% of the current month’s sales but are paid in the following month; and supplies are 1% of the current month’s cost of goods sold.

10		What are the total cash inflows from the collection of receivables in November?
			A)	$144,000
			B)	$224,000
			C)	$240,000
			D)	$291,500
11		What is the budgeted accounts receivable balance on December 31?
			A)	$108,000
			B)	$162,000
			C)	$270,000
			D)	$360,000
12		What are the budgeted purchases of inventory in October?
			A)	$ 90,000
			B)	$120,000
			C)	$122,000
			D)	$152,000
13		What are the budgeted cash payments for inventory purchases in November?
			A)	$ 89,600
			B)	$ 92,400
			C)	$125,600
			D)	$129,000
14		What is the budgeted accounts payable balance on November 30?
			A)	$38,400
			B)	$39,600
			C)	$76,200
			D)	$89,600
15		What is the amount of expected cash outflows for selling and administrative expenses for November?
			A)	$ 98,280
			B)	$101,000
			C)	$108,280
			D)	$110,200
16		What is the budgeted net income for the month of December?
			A)	$ 53,120
			B)	$106,360
			C)	$116,360
			D)	$117,720
17		Which of the following is not a section of the cash budget?
			A)	Cash receipts section
			B)	Cash payments section
			C)	Investing section
			D)	Financing section

Use the following information to answer questions 18 and 19.

Paisley Products has budgeted the following information for August:

Cash receipts	$663,000
Beginning cash balance	11,000
Cash payments	679,000
Desired ending cash balance	40,000

If there is a cash shortage, Paisley borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments, and interest is paid monthly at a rate of 1% on the first day of the following month. The company had no debt before August 1.

18		What is the shortage or surplus of cash before considering cash borrowed or repaid in August?
			A)	$5,000 shortage
			B)	$40,000 shortage
			C)	$45,000 shortage
			D)	$45,000 surplus
19		What is the amount of budgeted interest paid on September 1?
			A)	$400
			B)	$450
			C)	$500
			D)	$550
20		In reviewing the schedule of cash payments and the pro forma income statement for March, you notice that the amounts for sales commissions differ. A possible explanation for the difference is
			A)	the amount of sales used to produce the schedule of cash payments is different from the amount used on the pro forma income statement.
			B)	the amount of sales commissions used for the schedule of cash payments is based upon the expected ending cash balance, and the amount used for the pro forma income statement is based upon the expected amount of net income.
			C)	the amount of sales commissions used for the schedule of cash payments is based upon the month in which the commissions are paid, and the amount used for the pro forma income statement is based upon the month in which the commissions are earned.
			D)	the title, “sales commissions”, used on the two budgets represents different items. Therefore, there is no reason the two amounts should be equal.