NAME: _________________________________________ FIN081 – FINANCIAL MANAGEMENT

COURSE & SECTION: ______________________________ P2 QUIZ # 1 75 minutes

DATE & CLASS SCHEDULE:__________________________ SET A 55 points

I. MULTIPLE CHOICE. Theory - Financial Planning & Budgeting (1 point each)

________1. A manner of budgeting in which managers are required to validate all costs as if the programs
involved were being projected for the first time

A. imposed budgeting C. participatory budgeting

B. zero based budgeting D. continuous budgeting

________2. This is a detailed proposal for the future that is usually expressed in formal quantitative terms
A. plan C. budget
B. forecast D. financial analysis

________3. Which of the following are/is a part(s) of operating budget?

A. direct materials budget C. capital expenditure budget
B. working capital budget D. all of the above

________4. The 4 sections of a cash budget does not include

A. cash receipts section C. cash disbursement section
B. financing section D. depreciation section

________5. On a per unit scale, this type of cost changes as activity level changes but remains constant in total
A. fixed cost C. mixed cost
C. variable cost D. step cost

________6. I. The usual starting point in budgeting is to make a projection of net income.
II. Financial ratios are used in the budgeting process.
A. both statements are true C. only statement I is true
B. both statements are false D. one statement is true, the other is false

________7. I. Control involves developing objectives and preparing the various budgets to achieve objectives
II. A company’s strength and weakness are internal factors while its opportunities and threats are
generally external factors
A. statement I is true C. statement II is false
B. both statements are false D. statement II is true

________8. I. Cash collections in a schedule of cash collections typically consist of collections on sales made to
customers in prior periods plus collections on sales made in the current budget period.
II. The selling and administrative expense budget lists the budgeted expenses for areas other than
manufacturing.
A. both statatements are true C. one statement is true, the other is false
B. only statement I is true D. both statements are false

________9. I. Direct Materials Budget

II. Production Budget
Which of the above is prepared before the sales budget?
A. I only C. II only
B. both I & II D. neither I nor II

_______10. Which of the following budgets is/are prepared before the cash budget?
A. selling & administrative expense budget C. production budget
B. ending inventory budget D. all of the above

_______11. An organization’s budget program should not be used

A. to motivate employees C. to help evaluate managers
B. to blame managers for not meeting budgetary goals D. to allocate resources to different departments

_______12. Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget?
A. The Manufacturing Overhead Budget provides a schedule of all costs of production other than direct
materials and labor costs
B. The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.
 C. The Manufacturing Overhead Budget shows the expected cash disbursements for manufacturing
overhead.
D. The Manufacturing Overhead Budget is prepared after the Sales Budget.

_______13. Which financial information is used as a firm’s key performance indicator in assessing its budget?
A. sales per number of employee C. guest satisfaction survey
B. employee opinion survey D. market share

_______14. Which of the following is needed to prepare a production budget?

A. budgeted unit sales C. budgeted raw materials to be purchased
B. beginning work in process units D. estimated cost of goods sold

_______15. Estimated cash payments are planned reductions in cash from all of the following except:
A. manufacturing and operating expenses C. capital expenditures
B. notes & accounts receivable collection D. payments for dividends

_______16. Management accountants usually provide for a minimum cash balance in their cash budgets for which of the
following reasons?
A. stockholders demand a minimum cash balance
B. it is an important way of effectively managing cash
C. it provides a safety buffer for variations in estimates
D. to have funds available for major capital expenditures

_______17. Monthly scorecards provide a company with measuring and controlling its budgetary objectives. Which is
not a goal of monthly scorecard?
A. to review the actual performance against the budget
B. to find out what went wrong with the operations
C. to look at future risks and opportunities not previously factored in the budget
D. to check if the company is still in line with its key performance indicators

_______18. The following are objectives of financial planning & budgeting except:
A. planning C. control
B. coordination D. none of the above

_______19. I. The budgeted balance sheet assumes that all operating and financing plans are met
II. The cash budget presents the expected inflow and outflow of cash for a specified period of time.

A. only statement I is true C. both statements are true

B. both statements are false D. only statement II is true

_______20. This budget shows the plan of operations where the details of sales, production and expenses are laid out.
A. production budget C. operating budget
B. sales budget D. financial budget

PART II. MULTIPLE CHOICE. Computation - Financial Planning & Budgeting (2 points each)

_______21. All of Mikasa Company's sales are on account. Thirty-five percent of the credit sales are collected in
the month of sale, 45% in the month following sale, and the rest are collected in the second month following
sale. Bad debts are negligible and should be ignored. The following are budgeted sales data for the company:

January February March April

TOTAL SALES (in pesos) 50,000 60,000 40,000 30,000

What is the cash amount that should be collected in March?

A. P 39,000 C. P 37,000
B. P 27,500 D. P 51,000

_______22. On January 1, Levi Company has 8,000 units of Product A on hand. During the year, the company plans to sell
30,000 units of Product A, and plans to have 6,500 units on hand at year end. How many units of Product A
must be produced during the year?
A. 28,500 C. 31,500
B. 30,000 D. 36,500
_______23. Armin Corp.’s sales budget shows the following projection for next year

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Unit Sales 60,000 80,000 45,000 55,000

Inventory at the beginning of the year was 18,000 units. The finished goods inventory at the end of each
quarter is to equal 30% of the next quarter's budgeted unit sales. How many units should be produced
during the first quarter?
A. 24,000 C. 48,000
B. 66,000 D. 72,000

_______24. Ymir, Inc.’s most recent production budget indicates the following required production

October November December

Required production in units 210,000 175,000 110,000

Each unit of finished product requires 5 pounds of raw materials. The company maintains raw materials
inventory equal to 25% of the next month's expected production needs. How many pounds of raw
material should Ymir, Inc. plan on purchasing for the month of November?

A. 1,006,250 C. 793,750
B. 1,012,500 D. 893,500

_______25. Zeke Corporation is working on its direct labor budget for the next two months. Each unit of output
requires 0.41 direct labor-hours. The direct labor rate is P8.10 per direct labor-hour. The production budget calls
for producing 5,000 units in May and 5,400 units in June. If the direct labor work force is fully adjusted to the total
direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?
A. P 16,605.00 C. P 17,933.40
B. P 17,269.20 D. P 34,538.40

_______26. Paradis Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor
budget indicates that 5,600 direct labor-hours will be required in August. The variable overhead rate is P5.40 per
direct labor-hour. The company's budgeted fixed manufacturing overhead is P69,440 per month, which includes
depreciation of P15,680. All other fixed manufacturing overhead costs represent current cash flows. The August
cash
disbursements for manufacturing overhead on the manufacturing overhead budget should be:
A. P 99,680 C. P 84,000
B. P 53,760 D. P 30,240

_______27. The manufacturing overhead budget at Reiner Corporation is based on budgeted direct labor-hours. The
direct labor budget indicates that 5,800 direct labor-hours will be required in May. The variable overhead rate is P9.10 per
direct labor-hour. The company's budgeted fixed manufacturing overhead is P104,400 per month, which includes
depreciation of P8,120. All other fixed manufacturing overhead costs represent current cash flows. The company
recomputes its predetermined overhead rate every month. The predetermined overhead rate for May should be:
A. P 9.10 C. P 27.10
B. P 18.00 D. P 25.70

_______28. Erwin Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget
shows 1,300 units are planned to be sold in March. The variable selling and administrative expense is P4.20 per unit. The
budgeted fixed selling and administrative expense is P19,240 per month, which includes depreciation of P3,380 per
month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash
disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:
A. P 15,680 C. P 5,460
B. P 24,700 D. P 21,320

_______29. Historia Inc. is working on its cash budget for March. The budgeted beginning cash balance is P35,000.
Budgeted cash receipts total P142,000 and budgeted cash disbursements total P151,000. The desired ending cash balance
is P30,000. To attain its desired ending cash balance for March, the company needs to borrow:
A. P 0 C. P 4,000
B. P 56,000 D. P 30,000

_______30. Below is budgeted production and sales information for Colossal Company for the month of December:
 Product A Product B
Estimated beginning inventory 30,000 units 18,000 units
Desired ending inventory 32,000 units 15,000 units
Region 1, anticipated sales 320,000 units 260,000 units
Region 2, anticipated sales 190,000 units 130,000 units

The unit selling price for product A is P5 and for product B is P14. Budgeted sales for the month:
A. P 2,040,000 C. P 4,680,000
B. P 6,692,000 D. P 8,010,000

PART III. MULTIPLE CHOICE. Long Problem - Financial Planning & Budgeting (3 points each)

31-33. The Vishwakumar Company, a merchandising firm, has budgeted its activity for December according to the
following information:
Sales at P550,000, all for cash.
Merchandise inventory on November 30 was P300,000.
Budgeted depreciation for December is P35,000.
The cash balance at December 1 was P25,000.
Selling and administrative expenses are budgeted at P60,000 for December and are paid in cash.
The planned merchandise inventory on December 31 is P270,000.
The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in
cash.

______31. The budgeted cash receipts for December will be

A. P 412,500 C. P 137,500
B. P 585,000 D. P 550,000

______32. The budgeted cash disbursements for December will be

A. P 382,500 C. P 442,500
B. P 472,500 D. P 477,500

______33. The budgeted net income for December is

A. P 107,500 C. P 137,500
B. P 42,500 D. P 77,500

34-35. The Specter Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the
next
four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units.
The Specter Company wishes to maintain a desired ending finished goods inventory of 20% of the following months
sales.

______34. What should the budgeted production be for January?

A. 236,000 C. 181,000
B. 200,000 D. 219,000

______35. What would be the budgeted production for February?

A. 186,000 C. 181,000
B. 222,000 D. 174,000

end of P2 Quiz #1
SOLUTION SHEET