Of the four costs shown below, which would not be included in the cash budget of an insurance firm?

Question 13. A budget that gives a summary’ of all the functional budgets and projected Profit and Loss Account is known as …. (A) Capital budget (B) Flexible budget (C) Master budget (D) Discretionary budget Answer: (C) Master budget

Question 14. The fixed-variable cost classification has a special significance in the preparation of (A) Flexible budget (B) Master budget (C) Cash budget (D) Capital budget Answer: (A) Flexible budget

Question 15. The basic difference between a fixed budget and a flexible budget is that a fixed budget (A) Includes only fixed costs, and a flexible budget only variable costs (B) Is a budget for a single level of some measures of activity, while a flexible budget consists of several budgets based on different activity levels (C) Is concerned with future acquisition of fixed assets, while a flexible budget is concerned with expenses that vary with sales (D) Cannot be changed after a fiscal period begins, while a flexible budget can be changed after a fiscal period begins Answer: (B) Is a budget for a single level of some measures of activity, while a flexible budget consists of several budgets based on different activity levels

Question 16. When preparing a production budget, the quantity to be produced equals: (A) Sales Quantity + Opening Stock + Closing Stock (B) Sales Quantity – Opening Stock + Closing Stock (C) Sales Quantity – Opening Stock – Closing Stock (D) Sales Quantity + Opening Stock – Closing Stock Answer: (B) Sales Quantity – Opening Stock + Closing Stock

Question 17. (A) Depreciation of fixed asset (B) Commission paid to agents (C) Office salaries (D) Capital cost of a new computer Answer: (A) Depreciation of fixed asset

Which of the following would not lead to an increase in net cash flow?

Question 19. Which of the information below should be contained in a budget manual? (A) An organisation chart (B) Timetable for budget preparation (C) A list of account codes (D) All (A), (B) and (C) Answer: (D) All (A), (B) and (C)

Question 20. NSZ Ltd. cash budget forewarns of a short term surplus. Which of the following would be appropriate action to be taken in such a situation? (A) Increase debtors and stock to boost sales (B) Purchase new fixed assets (C) Repay long term loans (D) All of the above Answer: (A) Increase debtors and stock to boost sales

Question 21. A Ltd. is a manufacturing company that has no production resource limitations for the foreseeable future. The Managing Director has asked the company mangers to coordinate the preparation of their budgets for the next financial year. In what order should the following budgets be prepared? (1) Sales budget (2) Cash budget (3) Production budget (4) Purchase budget (5) Finished goods inventory budget Select the correct answer from the options given below. (A) (2), (3), (4), (5), (1) (B) (1), (5), (3), (4), (2) (C) (1), (4), (5), (3), (2) (D) (4), (5), (3), (1), (2) Answer: (B) (1), (5), (3), (4), (2)

Question 22. A plan expressed in financial terms may also be known as a: (A) Budget (B) Forecast (C) Balanced scorecard (D) Final account Answer: (A) Budget

A master budget comprises (A) The budgeted profit loss account (B) Budgeted cash flow, budgeted profit and loss, budgeted balance sheet (C) Budgeted cash flow (D) Entire sets of budgets prepared Answer: (B) Budgeted cash flow, budgeted profit and loss, budgeted balance sheet

Question 23. (A) Larger sales volume (B) Reduced materials costs (C) Lower depreciation charge (D) Higher selling price Answer: (C) Lower depreciation charge

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