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This exam is a study exam. While the exam you take will be similar in format, you can expect different questions and topics covered in different ways at different levels of difficulty. PROBLEM I. M ULT IPLE CHO ICE (120 points total; 3 points each) Use the special answer sheet (items #1 #40) for your response to this problem. For each question, choose the most correct answer. 1. All of the following are true statements about the role of budgets and budgeting except a. A budget is a quantitative summary of the expected allocations and financial consequences of the organizations shortterm operating activities. b. Budgeting includes the process of estimating money inflows and outflows to determine a financial plan that will meet objectives. c. The difference between actual results and the budget plan are called variances. d. Budgeting solves most business challenges because it coordinates activities and communicates the organizations shortterm goals to its members. e. Two of the above statements are untrue statements. 2. The Williams Merchandise Company budgeted $40,000 in sales for the month of December. Williams gross margin percentage is 70%. If Williams has budgeted to purchase $18,000 in merchandise during December, then the budgeted change in inventory levels over the month of December is a a. $6,000 increase. b. $15,000 increase. c. $10,000 decrease. d. $22,000 decrease. e. None of the above. 3. Which of the following statements is correct ? a. The planning and control functions of management are essentially the same thing. b. Zerobased budgeting requires managers to justify all costs of programs as if these programs were being proposed for the first time. c. One difficulty with selfimposed budgets is that they are not subject to any type of review. d. When preparing a materials purchase budget, desired ending inventory is deducted from the total needs of the period to arrive at materials to be purchased. e. Two of the above statements are correct. Use the following information to answer questions 4 and 5: Noskey Corporation is a merchandising firm. Information pertaining to Noskeys sales revenue is presented in the following table: June July August (Actual) (Budget) (Budget) Cash sales $ 80,000 $ 100,000 $ 60,000 Credit sales 240,000 360,000 180,000 Total sales $ 320,000 $ 460,000 $ 240,000 Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to the amount necessary to support the next months sales. The cost of goods sold is 30% of the selling price. All purchases of inventory are on account: 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.... View Full Document

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