#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 is the primary objective of budgeting in accounting?
To plan and allocate resources
ExplanationPlans and allocates resources efficiently.
#7
Which budget focuses on the expected cash inflows and outflows during a specific period?
Cash budget
ExplanationProjects cash inflows and outflows.
#8
Which budgeting method allocates resources based on the activities that incur costs?
Activity-based budgeting
ExplanationAllocates resources based on cost-incurring activities.
#9
What is the primary purpose of a sales budget?
To project sales revenue for a period
ExplanationForecasts sales revenue.
#10
What does a flexible budget do?
It adjusts budgeted amounts based on actual activity levels.
ExplanationAdapts to actual activity for accurate budgeting.
#11
Which budgeting method involves setting budgets based on input from all levels of the organization?
Participative budgeting
ExplanationIncorporates input from various organizational levels.
#12
What is a zero-based budget?
A budgeting method that requires justification for every expense.
ExplanationRequires justification for all expenses from scratch.
#13
What is a variance in budgeting?
The difference between actual and budgeted amounts.
ExplanationDiscrepancy between actual and budgeted figures.
#14
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.
#15
What is a static budget?
A budget that remains fixed regardless of changes in activity levels.
ExplanationBudget stays constant despite activity changes.
#16
What does the term 'variance analysis' refer to in budgeting?
The process of comparing actual results to budgeted amounts.
ExplanationComparing actual to budgeted figures.
#17
What does the acronym ROI stand for in budgeting?
Return on Investment
ExplanationMeasures return on investment.
#18
Which budgeting approach involves setting budgets based on previous period figures with adjustments?
Incremental budgeting
ExplanationUses prior period figures with adjustments.
#19
Which budget is typically prepared first in the master budgeting process?
Sales budget
ExplanationUsually the initial budget prepared.
#20
What is the primary purpose of a cost of goods sold budget?
To calculate the cost of goods sold
ExplanationDetermines cost of goods sold.
#21
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.
#22
What is a key limitation of traditional budgeting?
It does not adapt well to changing circumstances.
ExplanationInflexible to changing situations.
#23
Which of the following is a qualitative forecasting method?
Delphi method
ExplanationUtilizes expert opinions for forecasting.
#24
What is a sunk cost in budgeting?
A cost that has already been incurred and cannot be recovered
ExplanationExpense already incurred and unrecoverable.
#25
Which budgeting method requires managers to justify all expenses, starting from zero?
Zero-based budgeting
ExplanationDemands justification for expenses from scratch.