VSA CPA Review

Management Services Financial Planning and Budgeting Techniques 1

1. A budget serves as a benchmark against which:

A. actual results can be compared.
B. allocated results can be compared.
C. actual results become inconsequential.
D. allocated results become inconsequential.

2. Wilson Corporation is budgeting its equipment needs on an on-going basis, with a new quarter
being added to the budget as the current quarter is completed. This type of budget is most
commonly known as a:
A. capital budget. C. revised budget.
B. rolling budget. D. pro-forma budget.

3. The comprehensive set of budgets that serves as a company's overall financial plan is
commonly known as:
A. an integrated budget. C. a master budget.
B. a pro-forma budget. D. a financial budget.

4. Which of the following budgets is based on many other master-budget components?

A. Direct labor budget. C. Sales budget.
B. Overhead budget. D. Cash budget.

5. A manufacturing firm would begin preparation of its master budget by constructing a:

A. sales budget. C. cash budget.
B. production budget. D. capital budget.

6. Which of the following budgets is prepared at the end of the budget-construction cycle?
A. Sales budget. C. Budgeted financial statements.
B. Production budget. D. Cash budget.

PRODUCTION AND INVENTORY BUDGET

7. The company has beginning finished goods inventory amounting to P20,000. It produced
P100,000 worth of inventory during the period and sold P70,000 worth of inventory. How
much finished goods inventory was left at the end of the period?
a. 50,000 c. 170,000
b. 120,000 d. 70,000

8. The company has beginning finished goods inventory amounting to P20,000. It plans to sell
P70,000 worth of inventory and still have P50,000 worth of finished goods inventory at the end of
the period. How much should the company plan to produce for the period?
a. 170,000 c. 100,000
b. 120,000 d. 70,000
9. The company has beginning merchandise inventory amounting to P15,000. It purchased
P100,000 worth of inventory during the period and sold P70,000 worth of inventory. How
much merchandise inventory was left at the end of the period?
a. 45,000 c. 115,000
b. 30,000 d. 85,000

10. The company has beginning merchandise inventory amounting to P15,000. It plans to sell
P70,000 worth of inventory and still have P45,000 worth of finished goods inventory at the end of
the period. How much should the company plan to purchase for the period?
a. 115,000 c. 85,000
b. 70,000 d. 100,000

Comprehensive: A Company has budgeted sales at P 100,000 and expects a profit of 10% of the
sales. Expenses are estimated as follows: selling = 12% of sales; administrative = 8% of sales. Labor
is expected to be 40% of the total manufacturing costs. Factory overhead is to be applied at 75% of
direct labor costs. Inventories are projected as follows:
January 1 December 31
Materials P 5,500 P 8,000
Work-in-process 1,000 11,000
Finished goods 7,500 2,500
Determine the budgeted amount for:
A) Cost of goods sold
B) Total manufacturing cost
C) Factory overhead
D) Materials Purchase

1
 SALES AND ACCOUNTS RECEIVABLE BUDGET
11. The company has beginning cash balance amounting to P100,000. It plans to disburse P120,000
and still have P130,000 cash at the end of the period. How much gross cash inflows should the
company plan to generate?
a. 120,000 c. 110,000
b. 130,000 d. 150,000

12. The company has beginning cash balance amounting to P100,000. It plans to disburse P120,000
and still have P130,000 cash at the end of the period. How much gross cash inflows from
financing should the company plan to generate if it foresees gross cash inflows from operating
and investing activities amounting to P42,000?
a. 108,000 c. 150,000
b. 192,000 d. 230,000

13. The lending Corporation has the following historical pattern on its credit sales:
70% during the month of sale 4% in the third month after sale
15% in the first month after sale 1% uncollectible
10% in the second month after sale
The sales on account of the last six months of the year were reported as follows:
July P120,000 October 180,000
August 140,000 November 200,000
September 160,000 December 170,000
Cash collection in October amounted to
a. P168,800 c. P178,200
b. P 42,800 d. P126,000

14. The lending Corporation has the following historical pattern on its credit sales:
70% during the month of sale 4% in the third month after sale
15% in the first month after sale 1% uncollectible
10% in the second month after sale
The sales on account of the last six months of the year were reported as follows:
July P120,000 October 180,000
August 140,000 November 200,000
September 160,000 December 170,000
The total cash collections during the fourth calendar quarter from sales made on account during
the fourth calendar quarter would be
a. P345,000 c. P502,800
b. P550,000 d. P460,000

15. ABC Inc. has projected sales to be P80,000 in April, P100,000 in May and P120,000 in June. ABC
collects 40% of a month’s sales in the month of sale, 40% in the month following the sale, and
20% in the second month following the sale. What is the accounts receivable balance on June
30?
a. P 92,000 c. P 20,000
b. P 72,000 d. Some other number

16. ABC, Inc. has projected sales: February, P10,000; March, P9,000; April, P8,000; May, P10,000;
and June, P 11,000. ABC has 30% cash sales and 70% sales on account. Accounts are
collected 40% in the month following the sale and 55% collected the second month. What would
be the total cash receipts in May?
a. P 3,000 c. P 8,705
b. P 8,150 d. Some other number

Comprehensive: Past collections experienced by the ompany indicate that 60% of the sales billed in a
month are collected during the month of sales, 30% are collected in the following month, and 10% are
collected in the second following month. The following are the projected sales for next year:
January P 480,000
February P 420,000
March P 500,000
April P 550,000
May P 600,000
Determine the budgeted amounts for the following:
A) March collections
B) May collections
C) AR balance as of April 1
D) AR balance as of June 1