1. A company plans on selling 200 units. The selling price per unit is $12. There are 20 units in beginning inventory, and the company would like to have 50 units in ending inventory. How many units should be produced for the coming period?
a. 250
b. 200
c. 230
d. 220
e. None of the above

2. Which of the following is needed to prepare a budgeted income statement?
a. The production budget
b. The budgeted balance sheet
c. Budgeted selling and administrative expenses
d. The capital expenditures budget
e. None of the above

3. Select the one budget below that is not a financial budget.
a. The cost of goods sold budget
b. The cash budget
c. The budgeted balance sheet
d. The capital expenditures budget
e. None of the above

4. The cash budget serves which of the following purposes?
a. Documents the need for liberal inventory policies
b. Provides information about the ability to repay loans
c. Reveals the amount lost due to uncollectible accounts
d. Reveals the amount of depreciation expense
e. None of the above

5. Assume that a company has the following accounts receivable collection pattern:
Month of sale ........40%
Month following sale .....60%
All sales are on credit. If credit sales for January and February are $100,000 and $200,000, respectively, the cash collections for February are
a. $140,000.
b. $300,000.
c. $120,000.
d. $160,000.
e. $80,000.

6. The percentage of accounts receivable uncollectible can be ignored for cash budgeting because
a. For most companies, it is not a material amount.
b. It is included in cash sales.
c. It appears on the budgeted income statement.
d. No cash is received from an account that defaults.
e. None of the above.

7. An ideal budgetary system is one that
a. Encourages dysfunctional behavior.
b. Encourages myopic behavior.
c. Encourages goal-congruent behavior.
d. Encourages subversion of an organization’s goals.
e. Does none of the above.

8. Some key budgetary features that tend to promote positive managerial behavior are
a. Frequent feedback on performance.
b. Participative budgeting.
c. Realistic standards.
d. Well-designed monetary and nonmonetary incentives.
e. All of the above.

9. Which of the following is not an advantage of participative budgeting?
a. It fosters a sense of creativity in managers.
b. It encourages budgetary slack.
c. It fosters a sense of responsibility.
d. It encourages greater goal congruence.
e. It tends to lead to a higher level of performance.

10. Which of the following items is not a possible example of myopic behavior?
a. Promotion of deserving employees
b. Reducing expenditures on preventive maintenance
c. Cutting back on new product development
d. Laying off top sales personnel so that budgeted income can be achieved
e. Buying cheaper, lower-quality materials so that the company does not exceed the materials purchases budget