Cost Accounting Quiz: Cash Budgets

3 questions · exam conditions

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Cash BudgetsQuestion 1 of 3

Titan Corp. operates with a cash conversion cycle of 75 days (40-day collection period, 50-day inventory period, 15-day payment period). Monthly sales are $600,000 with a 35% gross margin. The company wants to reduce its cash cycle to 65 days by improving collections to 30 days. If beginning cash is $180,000 and monthly fixed costs are $140,000, what is the one-time cash flow improvement from this change?

$150,000 one-time cash improvement from accelerated collections

$200,000 one-time cash improvement including inventory effects

$250,000 one-time cash improvement from cycle optimization

$300,000 one-time cash improvement with maximum efficiency gains

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Cost Accounting Quiz

Cost Accounting Quiz: Cash Budgets

Practice Cash Budgets in Cost Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Cash Budgets, giving you a quick way to practice the rules, question types, and explanations that matter most for Cost Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

$150,000 one-time cash improvement from accelerated collections
$200,000 one-time cash improvement including inventory effects (correct answer)
$250,000 one-time cash improvement from cycle optimization
$300,000 one-time cash improvement with maximum efficiency gains

Explanation: Daily sales = $600,000 ÷ 30 = $20,000. Reducing collection period from 40 to 30 days frees up 10 days × $20,000 = $200,000 in cash from accounts receivable. The inventory and payment periods remain unchanged, so the improvement is specifically from collections acceleration. Choice A underestimates the daily sales impact. Choice C includes unrelated cycle effects. Choice D overstates the improvement beyond the collection period change.

Question 2

Meridian Corp. has the following data for Q1: Beginning cash balance $45,000, sales collections of $180,000 (60% cash sales, 40% collected from prior period receivables), purchases paid of $95,000, operating expenses paid of $38,000, and equipment purchase of $25,000. If the company maintains a minimum cash balance of $30,000 and can borrow in increments of $5,000 at 8% annual interest, what is the ending cash balance after any necessary borrowing?

$67,000 with no borrowing required (correct answer)
$70,000 after borrowing $5,000 for operations
$72,000 after borrowing $10,000 for expansion
$75,000 after borrowing $15,000 for safety margin

Explanation: Beginning cash $45,000 + Collections $180,000 - Purchases $95,000 - Operating expenses $38,000 - Equipment $25,000 = $67,000. Since $67,000 > $30,000 minimum, no borrowing is needed. Choice B incorrectly assumes borrowing is needed. Choice C confuses equipment purchase with expansion requiring additional borrowing. Choice D adds unnecessary borrowing beyond the minimum requirement.

Question 3

Galaxy Corp. prepares cash budgets considering foreign exchange effects. Domestic operations generate $400,000 monthly, while European operations contribute €250,000 monthly. The budget assumes €1 = $1.20, but the actual rate is €1 = $1.15. Monthly expenses are $675,000. Beginning cash is $150,000 with a $100,000 minimum balance. What is the monthly shortfall due to currency fluctuation?

$12,500 monthly shortfall due to unfavorable exchange rate movement (correct answer)
$15,000 monthly shortfall including transaction cost effects
$17,500 monthly shortfall with compounded currency impact
$20,000 monthly shortfall assuming maximum currency exposure

Explanation: Budgeted European contribution: €250,000 × $1.20 = $300,000. Actual European contribution: €250,000 × $1.15 = $287,500. Currency shortfall: $300,000 - $287,500 = $12,500 per month. Total budgeted cash flow: $400,000 + $300,000 - $675,000 = $25,000 positive. Actual cash flow: $400,000 + $287,500 - $675,000 = $12,500 positive. The difference is exactly $12,500. Choice B adds transaction costs not mentioned. Choice C suggests compounding that doesn't apply to monthly calculations. Choice D overstates the currency impact beyond the actual rate difference.