Finance Review Questions With Answer Key
Finance Review Questions With Answer Key
Finance Review Questions With Answer Key
A. Planning
B. Directing/Leading
C. Organizing
D. Control
Planning is the forward-looking phase of the cycle; it involves setting long-term objectives and
24. Which of the following is the backward-looking phase of the planning and control cycle?
A. Planning
B. Directing/Leading
C. Organizing
D. Control
This is the phase in which managers compare actual to budgeted results to determine whether
the objectives set during the planning stage were met, and take corrective action where
necessary.
27. A _____________ is the vision of what management wants the organization to achieve over the
long term.
A. Strategic plan
B. Long-term objective
C. Short-term objective
D. Tactic
A. is top-down in nature.
D. is more likely to motivate people to work towards the organization's goals than a top-down
approach.
A. Operating budget
The components of the operating budget, when combined, form the budgeted income
statement. Together with the financial budgets, which combine to form the budgeted balance
sheet, these comprise the master budget.
36. Which of the following budgets shows how many units will be produced each period?
C. Sales budget
D. Production budget
39. Which of the following is not a source that can be used in preparing the sales budget?
A. Prior sales.
C. Industry trends.
D. Marketing activities.
The sales department usually bases sales estimates on information such as prior sales, industry
trends, and marketing activities. The production budget is based on the sales budget.
finished goods inventory policy is 10% of the following month's sales. March 1 inventory is
projected to be 1,400 units. How many units will be produced in March?
A. 10,000
B. 9,900
C. 13,000
D. 10,100
48. Marlow Company produces hand tools. A production budget for the next four months is as
follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's
ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to
sell 16,000 units in May. What is budgeted ending inventory for March?
A. 1,030
B. 1,300
C. 1,330
D. 1,650
April sales + (16,000 × 10%) - (April sales × 10%) = 13,300. So April sales × 90% = 11,700, which
means April sales is 13,000. March ending inventory is 10% × 13,000 = 1,300, which is the
meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production
needs. If the leather policy is met, what will the July 1 inventory be?
54. Jackson Inc. produces leather handbags. The production budget for the next four months is:
July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5
square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's
production needs. On July 1 leather inventory was expected to be 1,000 square meters. What
will leather purchases be in July?
A. Budgeted production units × Direct labor requirements per unit + Ending inventory -
Beginning inventory.
B. Budgeted production units × Direct labor requirements per unit + Beginning inventory -
Ending inventory.
60. Jillian Inc. produces leather handbags. The production budget for the next four months is: July
5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of
unskilled labor (paid P8 per hour) and 2.2 hours of skilled labor (paid P15 per hour). How many
total labor hours will be budgeted for September?
A. 7,500
B. 9,750
C. 16,500
D. 26,250
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 08-03d Direct labor budget.
Topic: Direct labor budget
63. Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000
units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods
inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of
unskilled labor (paid P8 per hour) and 2.2 hours of skilled labor (paid P15 per hour). What will
A. P24,675
B. P225,680
C. P303,800
D. P305,970
Production = (7,000 + 10% × 7,500) - (10% × 7,000) = 7,050. Cost = (7,050 × 1.3 × P8) + (7,050
66. Skylark has forecast production for the next three months as follows: July 4,900 units, August
6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be P17,000
plus P6 per unit produced. What is budgeted manufacturing overhead for August?
A. P56,600
B. P17,000
C. P39,600
D. P62,000
month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are
budgeted as follows:
A. P32,000
B. P41,000
C. P46,400
D. P17,000
Production for July is 4,000 + (40% × 6,000) - 1,500 = 4,900. Budgeted manufacturing overhead
is (4,900 × P6) + P17,000 = P46,400.
72. Harney, Inc. has prepared the following budgets for March. In March, budgeted production
equals budgeted sales, and raw materials inventory will stay constant.
A. P14,560
B. P24,960
C. P27,560
D. P37,960
constant.
A. P30,551
B. P31,800
C. P36,660
D. P38,160
78. Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000
units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next
month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and
administrative costs are budgeted to be P15,000 per month plus P5 per unit sold. What are
A. P24,500
B. P39,500
C. P35,000
D. P30,500
C. help managers plan ahead to make certain they will have enough cash on hand to meet
their operating needs.
D. summarize the cash flowing into and out of the business during the past period.
The cash budget helps managers plan ahead to make certain they will have enough cash on
84. Which component of the cash budget is shown as a line item on the budgeted balance sheet?
C. Cash repaid
The ending cash balance is an asset that would be shown on the budgeted balance sheet.
87. Dayton has forecast sales to be P205,000 in February, P270,000 in March, P290,000 in April, and
P310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit
and sales are collected 50% in the month of sale, 30% the month following and the remainder
two months after the sale. What are budgeted cash receipts in May?
A. P267,000
B. P296,000
C. P161,250
D. P241,500
90. Ivory Inc. has forecast purchases on account to be P310,000 in March, P370,000 in April,
P420,000 in May, and P490,000 in June. Seventy percent of purchases are paid for in the month
of purchase, the remaining 30% are paid in the following month. What are budgeted cash
A. P441,000
B. P469,000
C. P343,000
D. P294,000
are partially collected in the month of sale, with all collections completed by the end of the
month following the sale. The August 31 accounts receivable is budgeted to be P108,000. What
A. P389,500
B. P267,000
C. P457,000
D. P415,000
For August, P600,000 × 60% = P360,000 of sales are on account. P108,000/P360,000 = 30% of
credit sales are still not collected at the end of August, so 70% are collected in the month of
sale. For July, then, collections will be P475,000 × 40% = P190,000 in cash, plus (P475,000 ×
60% × 70%) + (P375,000 × 60% × 30%) = P267,000 in credit collections, for a total of P457,000.
96. Boxwood Inc. has forecast purchases on account to be P620,000 in March, P740,000 in April,
P840,000 in May, and P980,000 in June. Seventy percent of purchases are paid for in the month
of purchase, the remaining 30% are paid in the following month. What is the budgeted
Accounts Payable balance for June 30?
A. P588,000
B. P686,000
C. P294,000
D. P252,000
an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is
projected to be 1,500 units. What are budgeted purchases in units for August?
A. 6,600 units
B. 10,400 units
C. 5,400 units
D. 600 units