#1
Which of the following is not a component of a master budget?
Cost of goods sold budget
ExplanationExcludes calculation of goods sold.
#2
What is the primary purpose of a cash budget?
To determine the amount of cash needed to pay expenses.
ExplanationCalculates required cash for expenses.
#3
Which of the following is an advantage of budgeting?
It provides a benchmark for performance evaluation.
ExplanationOffers benchmark for performance.
#4
What is the purpose of a production budget?
To plan the quantity of units to be produced.
ExplanationPlans production unit quantities.
#5
Which of the following is a characteristic of an effective budget?
It provides specific goals and targets.
ExplanationSets clear objectives and targets.
#6
What does a flexible budget do?
It adjusts budgeted amounts based on actual activity levels.
ExplanationAdapts to actual activity for accurate budgeting.
#7
Which budgeting method involves setting budgets based on input from all levels of the organization?
Participative budgeting
ExplanationIncorporates input from various organizational levels.
#8
What is a zero-based budget?
A budgeting method that requires justification for every expense.
ExplanationRequires justification for all expenses from scratch.
#9
What is a variance in budgeting?
The difference between actual and budgeted amounts.
ExplanationDiscrepancy between actual and budgeted figures.
#10
What does the term 'rolling budget' refer to?
A budget that is prepared for a specific period and then revised for the next period.
ExplanationBudget continuously updated for successive periods.
#11
In capital budgeting, what does the payback period measure?
The time it takes for a project to recoup its initial investment.
ExplanationTime taken to recover initial investment.
#12
What is a key limitation of traditional budgeting?
It does not adapt well to changing circumstances.
ExplanationInflexible to changing situations.
#13
Which of the following is a qualitative forecasting method?
Delphi method
ExplanationUtilizes expert opinions for forecasting.
#14
What is a sunk cost in budgeting?
A cost that has already been incurred and cannot be recovered
ExplanationExpense already incurred and unrecoverable.
#15
Which budgeting method requires managers to justify all expenses, starting from zero?
Zero-based budgeting
ExplanationDemands justification for expenses from scratch.