SAN PEDRO COLLEGE
12 C. Guzman Street, 8000 Davao City, Philippines
Master of Arts in Hospital Administration
Third Trimester, SY 2019-2020
ACCOUNTING & FINANCIAL MANAGEMENT
QUIZ – OPERATIONAL BUDGETING
Multiple Choice:
1. Budgeting is:
a. The process of creating a formal plan and translating goals into a
quantitative format.
b. A technique for comparing actual costs with standard costs.
c. A technique for determining the cost of manufactured products.
d. A means of product costing that emphasizes activities as basic cost objects.
2. Budgets are related to the following management functions, except:
a. Planning
b. Control
c. Performance evaluation
d. None of above
3. The master budget:
a. Shows a comparison of forecasted and actual results
b. Is composed of operating and financial budgets
c. Reflects only those costs controllable by the individual manager
d. Is the budget of the master of the firm
4. Following are the parts of the operating budget, except:
a. Sales budget
b. Materials cost budget
c. Capital budget
d. Production budget
5. The starting point in preparing a comprehensive budget is:
a. The cash budget
b. The budgeted income statement
c. The sales forecast
d. The production budget
6. A strategic budget
a. Is a short-range management tool
b. Describes the long-term position, goals and objectives of an
organization within its environment
c. Involves evaluating specific long-term investment decisions
d. Is a short-rage consideration related to liquidity
7. The budget elements included in the financial budget process are the following,
except the:
a. Budgeted balance sheet
b. Capital budget
c. Cash budget and budgeted statement of cash flows
d. Budget variance
8. Among the components of the operating budget is the selling and administrative
expenses budget, which:
a. Is usually optional.
b. Is composed only of fixed costs.
c. Is difficult to allocate by month and therefore presented as a lump sum figure for
the whole year.
d. Should be detailed so that the key assumptions can be better
understood.
9. One component of the financial budget is the cash budget. The cash receipts section
of the cash budget includes all sources of cash, among which is:
a. Depreciation
b. Factory supplies
c. Extinguishment of debt
d. Loan proceeds
10. Following are parts of the operating budget, except:
a. Sales budget
b. Materials cost budget
c. Capital budget
d. Production budget
CASE PROBLEMS
Case 1
Earth Co. budgeted merchandise purchases of 40,000 units next month. The
expected beginning inventory is 12,000 units and the desired ending inventory at the
next month is 15,000 units.
Required: Budgeted sales in units for next month is____________.
(12,000 + 40,000 – 15,000) 37,000 units
Case 2
Eddie Inc. will starts its commercial operations on January 1, 2019. The sales
forecast per sales manager’s estimates for its first year of operations is 50,000 units.
However, the production manager estimated that only 80% of the sales forecast can
be produced with the available workforce and equipment. The product will be sold
for P20 per unit.
Required: The budgeted sales peso for Eddie Inc’s initial year of operations
is______________.
(50,000 x 80% = 40,000 x 20) P800,000
Case 3
Ginger Company is preparing its cash budget for next year. Budgeted sales for four
months are as follows:
April P80,000 June P240,000
May 160,000 July 80,000
Fifty percent of total sales is cash sales. The balance, or the credit sales, is collected
in the following manner:
70% in the month following the sale
20% in the second month following the sale
10% in the third month following the sale
Required: How much is the budgeted cash receipts in July?_______________
Cash sales July (80,000 x 50%) P40,000
Collection of accounts receivable from:
June sales (240,000 x 50% x 70%) 84,000
May sales (160,000 x 50% x 20%) 16,000
April sales (80,000 x 50% x 10%) 4,000 104,000
Budgeted cash receipts P144,000
Case 4
Peter Company has just prepared its master budget for the year 2019. Some of the
information used in the preparation of such budget is as follows:
a. Budgeted sales: January P480,000 April P500,000
February 520,000 May 576,000
March 560,000 June 640,000
b. Twenty percent of total sales is cash sales. The collections pattern for the sales
on credit is as follows:
30% in the month of sale
40% in the month after the month of sale
25% in the second month after the month of sale
c. Peter’s gross profit rate is 60% of sales.
d. Accounts payable arising from merchandise purchases is paid for in the month
following the purchase.
e. The company desires an inventory at the end of each month equal to 30% of the
next month’s sales in units.
f. The variable operating expenses (other than cost of goods sold) are 10% of sales
and are paid for in the month following the sale.
g. The annual fixed operating expenses are as follows:
Depreciation P336,000 Salaries P864,000
Advertising 576,000 Property taxes 192,000
Insurance 144,000
h. All of the fixed operating expenses are incurred uniformly throughout the year.
Cash fixed operating expenses are paid in the month of incurrence, except for:
- Insurance – paid quarterly in January, April and July
- Property taxes – paid twice a year in April and October
Required:
1. Budgeted cash collections in March for the sales made in March is__________.
Cash sales in March (560,000 x 20%) P112,000
Collection of credit sales in March
(560,000 x 80% x 30%) 134,400
Total P246,400
2. Budgeted purchases of merchandise for February is___________.
Cost of goods sold, February (520,000 x 40%) P208,200
Add: Ending inventory (560,000 x 40% x 30%) 67,200
Total P275,200
Less: Beginning inventory (520,000 x 40% x 30%) 62,400
Budgeted purchases during February P212,800
