2. BUDGETS

3. Question 1 What is the purpose of a budget? An objectiveCheap commodity Excess money Plan that outlines costs and revenue

4. Wrong Answer! Explanation or correct answer here

5. Master Question 2 Which of these is not a type of budget? Profit & Loss account Sales Departmental

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7. Question 3 Which of the following is a possible management response to correct an adverse overheads variance? Increase bonus payments Offer promotional discounts Reduce administrative headcount Cut supplier payments for raw materials

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9. Question 4 In the context of budgets, what is meant by “management by exception”? Variances are ignored Only adverse variances are investigated Budgets given to talented managers Focus on investigating unexpected variances

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11. Question 5 A budget report showed a £15,000 favourable sales variance. Which of the following is a possible explanation? Higher than expected selling price Lower than expected sales volume Lower than expected gross profit margin Higher than expected overtime

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13. Question 6 Which one of these would result in a favourable budget variance? Budget revenue £125k; actual £115k Actual gross profit £13k; budget profit £16k Budget material cost £18k; actual material cost £16k Actual sales £40k; budget sales £42k

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15. Question 7 The sales budget assumed that 200 Units would be sold for £15 each. Actual sales were £4,200. What was the variance? £1,2000 (adverse) £1,200 (favourable) £3,000 (adverse) £3,000 (favourable)

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17. Question 8 If the Net profit variance was £17,000 (favourable) and total costs were £4,300 below budget, what was the remaining sales variance? £21,300 (favouable) £17,200 (favouable) £21,300 (adverse) £12,700 (favourable)

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19. Question 9 Actual raw material costs per Unit turned out to be “2.50 less than budget (12.50 per Unit). If production was 3,000 Units, what was the raw material variance? £30,000 (favourable) £30,000 (adverse) £7,000 (favourable) £7,000 (adverse)

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21. Question 10 What is the difference between the budgeted figure and the actual figure known as? Miscellaneous costs Variance DefferenceBudget difference

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23. Question 11 Which of these is not one of the sub headings in a budget forecast? IncomeExpenses VarianceAssets

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25. Question 12 Which one of these is not a benefit or an advantage of budgeting? Helps cash flow planning Motivate staff Time consuming Provides a control facility

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27. Question 13 What does a favourable variance tell the manager of that department? Not spent as much as was anticipated Spent more than anticipated Needs to spend more for less Increased costs

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29. Question 14 Why would they be unhappy if there was a favourable variance that was large ? Planning was accurate Predictions of expenditure were wrong They can save the money Business is efficient

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31. Question 15 How might businesses accommodate an unavoidable overspend? Increasing projected expenses Predicting expenditure Reducing pricesBy putting up prices

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33. Question 16 What in your opinion is the reason why businesses have no choice but to use budgeting? Help business to be inflexible Grow the business Help with periodic planning of income and costs To help the business’ profits

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