QUIZ no.

4
Name:________________________________________ Score:______________
Course/Year:___________________________________

1. PTO Company desires an ending inventory of P140,000. It expects sales of P800,000 and has a beginning
inventory of P130,000. Cost of sales is 65% of sales. Budgeted purchases are
A. P 530,000 C. P 810,000
B. P 790,000 D. P1,070,000

2. Calypso Co. has projected sales to be P600,000 in January, P750,000 in February, and P800,000 in March.
Calypso wants to have 50% of next month’s sales needs on hand at the end of a month. If Calypso has an average
gross profit of 40%, what are the February 28 purchases?
A. P465,000 C. P775,000
B. P310,000 D. P428,000

3. Lorie Company plans to sell 400,000 units of finished product in July an anticipates a growth rate in sales of
5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month’s
estimated sales.
There are 300,000 finished units in the inventory on June 30. Each unit of finished product requires four pounds
of direct materials at a cost of P2.50 per pound. There are 800,000 pounds of direct materials in the inventory
on June 30.
How many units should be produced for the three-month period ending September 30?
A. 1,260,000 C. 1,331,440
B. 1,328,000 D. 1,424,050

4. If the required direct materials purchases are 8,000 pounds and the direct materials required for production is
three times the direct materials purchases, and the beginning direct materials are three and a half times the
direct materials purchases, what are the desired ending direct material in pounds?
A. 20,000 C. 12,000
B. 4,000 D. 32,000

5. If there were 30,000 pounds of raw material on hand on January 1, 60,000 pounds are desired for inventory at
December 31, and 180,000 pounds are required for annual production, how many pounds of raw material should
be purchased during the year?
A. 150,000 pounds C. 120,000 pounds
B. 240,000 pounds D. 210,000 pounds
6. Silver Bowl Company manufactures a single product. It keeps its inventory of finished goods at 75% the coming
month’s budgeted sales. It also keeps its inventory of raw materials at 50% of the coming month’s budgeted
production. Each unit of product requires two pounds of materials. The production budget is, in units: May, 1,000;
June, 1,200; July, 1,300; august, 1,600. Raw material purchases in July would be
A. 1,525 pounds C. 2,550 pounds
B. 2,900 pounds D. 3,050 pounds

7. Namuco, Inc. uses flexible budgeting for cost control. During the month of September, Namuco, Inc. produced
14,500 units of finished goods with indirect labor costs of P25,375. Its annual master budget reflects an indirect
labor costs, a variable cost, of P360,000 based on an annual production of 200,000 units. In the preparation of
performance analysis for the month of September, how much flexible budget should be allowed for indirect labor
costs?
A. P30,000 C. P25,375
B. P29,167 D. P26,100

8. Generous Company began its operations on January 1 of the current year. Budgeted sales for the first quarter
are P240,000, P300,000, and P420,000, respectively, for January, February and March. Generous Company
expects 20% of its sales cash and the remainder on account. Of the sales on account, 70% are expected to be
collected in the month of sale, 25% in the month following the sale, and the remainder in the following month.
How much should Generous receive from sales in March?
A. P304,800 C. P388,800
B. 294,000 D. P295,200

9. Obligacion Company has P299,000 in accounts receivable on January 1, 2006. Budgeted sales for January
are P860,000. Obligacion expects to sell 20% of its merchandise for cash. Of the remaining sales, 75% are
expected to be collected in the month of sale and the remainder the following month.
The January cash collections from sales are:
A. P815,000 C. P471,000
B. P691,000 D. P987,000

Question Nos. 10 through 13 are based on the following information:

Apollo Merchandiser asks your services to develop cash and other budget information for the first quarter of 2007.
In December 31, the store had the following balance:
Cash P 55,000
Accounts receivable 4,370,000
Inventories 3,094,000
Accounts payable 1,330,550

The following information are relevant to 2007 operations:

Sales:
a. Each month’s sales are billed on the last day of the month.
b. Customers are allowed a 3 percent discount if payment is made within 10 days after the billing date.
Receivables are booked gross.
c. Sixty percent of the billings are collected within the discount period, twenty-five percent are collected by
the end of the month, nine percent are collected by the end of the second month, and six percent are
considered entirely uncollectible.

Purchases:
1. Fifty four percent of all purchases and selling, general, and administrative expenses are paid in the month
 purchased and the remainder in the following month.
2. Each month’s units of ending inventory is equal to one hundred thirty percent of the next month’s units of
sales.
3. The cost of each unit of inventory is P200.
4. Selling, general, and administrative expenses, of which P20,000 is depreciation, are equal to fifteen percent
of the current month’s sales.

Actual and projected sales are as follows:

UNITS PESOS
November 11,800 P3,540,000
December 12,100 3,630,000
January 11,900 3,570,000
February 11,400 3,420,000
March 12,000 3,600,000
April 12,200 3,660,000

10. The respective amounts of budgeted purchases for the months of January and February are:
A. P2,418,000 and P2,360,000 C. P2,250,000 and P2,436,000
B. P2,380,000 and P2,280,000 D. P3,570,000 and P3,420,000

11. The budgeted cash disbursements for the month of February are:
A. P2,929,000 C. P2,949,000
B. P2,873,790 D. P2,853,790

12. The amount of cash collected from sales during the month of January is:
A. P3,338,760 C. P3,404,100
B. P3,551,160 D. P3,556,560

13. The number of units to be purchased during the month of March is:
A. 15,860 C. 12,000
B. 12,260 D. 15,600

14. A budget aids in

a. communication.
b. motivation.
c. coordination.
d. all of the above.

15. Both the budgeted quantity of material to be purchased and the budgeted quantity of material
to be consumed can be found in the
a. material purchases budget.
b. production budget.
c. pro forma income statement.
d. cash budget.
16. Which of the following objectives is not a primary purpose of preparing a budget?
a. To provide a basis for comparison of actual performance
b. To communicate the company’s plans throughout the entire business organization
c. To control income and expenditure in a given period.
d. To make sure the company expands its operations

17. Which of the following budgets provides the data for the preparation of the direct labor cost budget?
A. Direct materials purchase budget. C. Sales budget.
B. Cash budget. D. Production budget.

18. In preparing a cash budget, which of the following is normally the starting point for projecting cash requirements?
A. Fixed assets. C. Accounts receivable.
B. Sales. D. Inventories.

19. In estimating the sales volume for a master budget, which of the following techniques may be used to improve
the projections?
A. Brainstorming.
B. Statistical analysis.
C. Estimating from previous sales volume.
D. All of these are useful.

20. Beatless Corp, plans to sell 200,000 units of Let-It-Be product in July and anticipate a growth
in sales of 5% per month. The target ending inventory in units of the product is 80% of the
next month’s estimated sales. There are 150,000 units in inventory as of the end of June. The
production requirement in units of Let-It-Be for the quarter ending September 30 would be
a. 670,560 b. 691,525 c. 665,720 d. 675,925

21. Mien Co. is budgeting sales of 53,000 units of product Nous for October 2000. The
manufacture of one unit of Nous requires 4 kilos of chemical Loire. During October 1998,
Mine plans to reduce the inventory of Loire by 50,000 kilos and increase the finished goods
inventory of Nous by 6,000 units. There is no Nous work in process inventory. How many
kilos of Loire is Mien budgeting to purchase in October 2000?
a. 138,000 b. 162,000 c. 186,000 d. 238,000

22. A formal written statement of management’s plans for the future, packaged in financial terms, is a:
A. Responsibility report. C. Cost of production report.
B. Performance report. D. Budget.

23. Budgets are related to which of the following management functions?

A. Planning C. Control
B. Performance evaluation D. all of these

24. Which of the following is NOT an advantage of budgeting?

A. It forces managers to plan.
B. It provides resource information that can be used to improve decision making.
C. It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent
evaluation of performance.
 D. It provides organizational independence.

25. Which of the following is least likely a reason why a company prepares its budget?
A. To provide a basis for comparison of actual performance
B. To communicate the company’s plans throughout the entire business organization
C. To control income and expenditure in a particular period.
D. To make sure the company expands its operations.