Accounting Ch 7 and Ch 8

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Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

A. Sales budget, cash budget, direct materials budget, direct labor budget
B. Production budget, sales budget, direct materials budget, direct labor budget
C. Sales budget, cash budget, production budget, direct materials budget
D. Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

A continuous (or perpetual) budget:
A. is prepared for a range of activity so that the budget can be adjusted for changes in activity.
B. is a plan that is updated monthly or quarterly, dropping one period and adding another.
C. is a strategic plan that does not change.
D. is used in companies that experience no change in sales.

is a plan that is updated monthly or quarterly, dropping one period and adding another.

Which of the following statements is not correct?
A. The sales budget is the starting point in preparing the master budget.
B. The sales budget is constructed by multiplying the expected sales in units by the sales price.
C. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.
D. The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

Budgeted production needs are determined by:
A. adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.
B. adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total.
C. adding budgeted sales in units to the desired ending inventory in units.
D. deducting the beginning inventory in units from budgeted sales in units.

adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.

A labor efficiency variance resulting from the use of poor quality materials should be charged to:
A. the production manager.
B. the purchasing agent.
C. manufacturing overhead.
D. the industrial engineering department.

the purchasing agent.

An unfavorable direct labor efficiency variance could be caused by:
A. an unfavorable materials quantity variance.
B. an unfavorable variable overhead rate variance.
C. a favorable materials quantity variance.
D. a favorable variable overhead rate variance.

an unfavorable materials quantity variance.

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