#1
Which of the following is not a component of a master budget?
Sales budget
Production budget
Cash budget
Cost of goods sold budget
#2
What is the primary purpose of a cash budget?
To estimate the net income for a period.
To determine the amount of cash needed to pay expenses.
To project sales revenue for a period.
To calculate the cost of goods sold.
#3
Which of the following is an advantage of budgeting?
It increases uncertainty in decision-making.
It reduces the need for financial control.
It provides a benchmark for performance evaluation.
It discourages strategic planning.
#4
What is the purpose of a production budget?
To determine the amount of cash needed to pay expenses.
To project sales revenue for a period.
To estimate the net income for a period.
To plan the quantity of units to be produced.
#5
Which of the following is a characteristic of an effective budget?
It is prepared solely by top management.
It is too flexible and changes frequently.
It provides specific goals and targets.
It does not require any adjustments.
#6
What does a flexible budget do?
It remains static regardless of changes in activity levels.
It adjusts budgeted amounts based on actual activity levels.
It only includes fixed costs.
It is used exclusively by large corporations.
#7
Which budgeting method involves setting budgets based on input from all levels of the organization?
Zero-based budgeting
Incremental budgeting
Participative budgeting
Activity-based budgeting
#8
What is a zero-based budget?
A budget that starts at zero and then all expenses are added incrementally.
A budget that includes only fixed costs.
A budgeting method where last year's budget is adjusted based on inflation.
A budgeting method that requires justification for every expense.
#9
What is a variance in budgeting?
The difference between actual and budgeted amounts.
The total budgeted amount.
The difference between actual and forecasted amounts.
The difference between fixed and variable costs.
#10
What does the term 'rolling budget' refer to?
A budget that remains unchanged over time.
A budget that is prepared for a specific period and then revised for the next period.
A budget that only includes fixed costs.
A budgeting method that focuses on zero-based allocations.
#11
In capital budgeting, what does the payback period measure?
The time it takes for a project to generate profits equal to its initial investment.
The time it takes for a project to reach breakeven point.
The time it takes for a project's cash flows to equal its initial investment.
The time it takes for a project to recoup its initial investment.
#12
What is a key limitation of traditional budgeting?
It is too time-consuming to prepare.
It does not adapt well to changing circumstances.
It relies too heavily on historical data.
It encourages participative decision-making.
#13
Which of the following is a qualitative forecasting method?
Time series analysis
Regression analysis
Delphi method
Exponential smoothing
#14
What is a sunk cost in budgeting?
A cost that can be recovered
A cost that has already been incurred and cannot be recovered
A cost that varies with production level
A cost that remains constant
#15
Which budgeting method requires managers to justify all expenses, starting from zero?
Zero-based budgeting
Incremental budgeting
Activity-based budgeting
Participative budgeting