31. Select the incorrect statement regarding the human factor in the budgeting process.
A. There is a tendency for people to be uncomfortable with budgets.
B. The evaluation feature of budget systems is frightening for many people.
C. Budgets force employees to follow the organization’s plan.
D. Proper handling of human relations is essential to the establishment of an effective budget system.
32. The budgeting technique that provides for employee input into the planning process is known as:
A. Participative budgeting.
B. Perpetual budgeting.
C. Continuous budgeting.
D. Zero-based budgeting.
33. Which of the following is a benefit of participative budgeting?
A. Budget planning is highly centralized.
B. A twelve-month planning horizon is maintained at all times.
C. Employees tend to be more motivated to achieve the budget.
D. Communication is clearer because it flows in only one direction – upward.
34. What is the role of top management in a participative budgeting system?
A. Top management has no role – the budget is entirely developed by the lower-level employees.
B. Top management must ensure that employee-generated objectives are consistent with those of the company.
C. Top management must always tighten employee-set budget standards to eliminate employees’ attempts to build slack into the standards.
D. All of the other answers are correct.
35. Which of the following items is not needed to prepare a sales budget by product line?
A. Expected unit sales of each product.
B. Expected purchase price of each product.
C. Expected selling price of each product.
D. All of the other answers are correct.
36. Which of the following items would be least useful in preparing a schedule of cash receipts?
A. Expected revenue from cash sales.
B. Past accounts receivable collection experience.
C. Service charges for credit card sales.
D. Number of units expected to be purchased.
37. Meredith Company has completed its sales budget for the first quarter of 2012. Projected credit sales for the first four months of the year are shown below:
The company’s past records show collection of credit sales as follows: 30% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be:
A. $38,700.
B. $45,000.
C. $42,300.
D. $31,800.
38. Carruthers Company expects the following total sales:
The company expects 70% of its sales to be credit sales and 30% for cash. Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off in the month following the sale. The budgeted accounts receivable balance on May 31 is:
A. $14,350.
B. $15,750.
C. $20,550.
D. $22,500.
39. Browning Company’s sales budget shows the following expected total sales:
The company expects 70% of its sales to be on account (credit sales). Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off in the month following the sale. The total cash inflows from the collection of receivables in April would be:
A. $18,200.
B. $21,000.
C. $24,640.
D. $25,725.
40. Oak Furniture provided the following information relevant to its sales for December 2009 and the first quarter of 2010:
Based on the company’s collection history, 2% of credit sales are uncollectible, 40% are collected in month of sale and the remainder collected in the following month.
Cash collections in January from December 2009 credit sales would be:
A. $42,000.
B. $40,600.
C. $36,000.
D. $34,800.
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