Budgetary Planning and Control

25. ZBB is: A. Zero Based Budgeting. Every budget is built from scratch. B. Zero Based Budgeting. Used in not-for-profit organisations where profit should be zero. C. Zion Budgeting Basis. A technique originally developed by a group of American Corporations D. Zero Budgeting Bias. A technique where there is no bias in the budgeting process.     ZBB is Zero Based Budgeting. All budgets are reset to zero, and every penny must be justified. It is time consuming, but focuses managers on...

When building a cash budget, the following items are budgeted for the first quarter:   Jan Feb Mar Sales 10,000 12,000 15,000 Purchases 6,000 8,000 10,000 Wages 1,500 1,500 1,500 Other expenses 2,000 2,000 2,000   20% of all sales are cash sales. The remaining sales are on credit and customers have 30 days to pay.All purchases are made on credit and paid after 2 months.Wages are paid in the month they are incurred.Other Expenses include depreciation at £1,000 per month. What is the...

23. Which of the following statements are correct, with regards to budgeting?(i) The budget must be set centrally(ii) Budgets should never be exceeded(iii) There are financial rules governing the layout and calculations of a budget, eg once set, a budget cannot be altered A. (ii) only B. (ii) and (iii) C. They are all false D. They are all true Budgets may be set centrally, but may also be set by departmental managers.     Budgets may be exceeded – especially a sales budget!Unlike...

22. The most important part of budgeting is: A. The budget itself B. Review of actual results against the budget C. Knowing how much each manager has available to spend in their department D. Communication between managers and finance in setting the budget     Often overlooked, the most important factor is the review of results against expectations! Although in some organisations, the budget is perceived as the “pot of cash” or the amount that a manager has to spend, the true essence...

21. When setting budgets, the lead budget (the one to start with) and most important budgets are usually: A. “Sales” is the lead budget and “Cash” the most important B. “Cash” is the lead budget and “Profit” the most important C. “Production” is the lead budget and “Sales” the most important D. “Cash” is the lead budget and “The Master Budget” the most important     Often the company is limited by demand. It may have the capability to produce a million widgets, but if it can only...

20. Which of the following is not an advantage of zero-based budgeting? A. Easy to apply B. Helps identify inefficient operations C. Can increase staff motivation towards greater efficiency D. Ensures alternatives, such as outsourcing, are considered  

19. The difference between a fixed budget and a flexible budget is: A. A fixed budget assumes a given level of production and sales and a flexible budget can accommodate different levels of production B. A fixed budget considers fixed costs only, a flexible budget considers fixed and variable costs of production C. A fixed budget is for a single department, a flexible budget covers a range of departments and units D. A fixed budget is modified annually, a flexible budget is modified monthly...

18. Usually the actual results achieved by an organization will be different from what had been planned TRUE

17. A cash budget includes receipts that don't appear in the income statement TRUE

16. The starting point of producing the master budget is to produce the budgets for direct materials and direct labour FALSE

15. Which of the following is false? A. Receipts from sales on the cash budget will different from sales reported in the income statement B. A cash budget may include receipts such as the issue of shares C. An income statement shows payment of expenses when payment is actually made D. An income statement shows money as a receipt when it is earned  

14. Which approach to producing a budget, associated with the public sector, requires the identification of programmes and the allocation of resources to each programme? A. Planning, programming budgeting system (PPBS) B. Zero-based budgeting (ZBB) C. Incremental budget D. Performance budget  

13. An approach to producing a budget which encourages managers to justify a budget for their department and to justify each item in its entirety is called: A. Planning, programming budgeting system (PPBS) B. Zero-based budgeting (ZBB) C. Incremental budget D. Performance budget  

12. An approach to producing a budget which is based on the previous years budget is called: A. Planning, programming budgeting system (PPBS) B. Zero-based budgeting (ZBB) C. Incremental budget D. Performance budget

11. Which of the following is not a disadvantage usually associated with budgeting? A. Encourages "budget slack" B. Discourages delegation and the identification of management responsibility C. In practice, it is often difficult to come to an agreement about the organizations objectives D. Can often be a "paperwork exercise" not fully understood by mangers  

10. Which of the following is not an advantage usually associated with budgeting? A. Can be used to motivate staff B. Can be used to evaluate performance C. Encourages managers to "spend up to budget" D. Helps identify "limiting factors", such as production capacity  

9. Which of the following is not an advantage associated with a budget control system? A. Ensures competition for resources within an organization B. Ensures the objectives of an organization are defined C. Facilitates the delegation of responsibility D. Improves communication and coordination  

8. A typical set of budgets in an organization will include: A. Sales budget, production budget and direct materials budget B. Direct labour budget, production overhead budget and distribution budget C. Budget income statement, capital expenditure budget and cash budget D. All of the above  

7. XYZ company had budget sales of £120,000, direct materials of £40,000 and direct labour of £30,000. Actual sales where 25% up on budget. Calculate the flexed budget figures for XYZ company. A. Sales £120,000, direct materials £40,000 and direct labour £30,000 B. Sales £120,000, direct materials £50,000 and direct labour £37,500 C. Sales £150,000, direct materials £50,000 and direct labour £37,500 D. Sales £150,000, direct materials £40,000 and direct labour £30,000  

6. Which of the following statements is false? A. A capital expenditure budget will show costs not directly linked to production such as distribution costs B. A capital expenditure budget will show costs not directly linked to production such as administration costs C. A capital expenditure budget will show the planned expenditure associated with an increase in production facilities D. A capital expenditure budget will show the planned expenditure for direct materials

5. Which of the following statements is correct? A. In a large organization, budgets may be required for different products B. In a large organization, budgets may be required for the advertising department C. In a large organization, budgets may be required for the human resource department D. All of the above statements are correct  

4. Budgetary control includes all of the following except: A. The development and implementation of a budget by one key individual B. The continuous comparison of actual with budget results C. Providing a basis for revising the budget D. Establishing the responsibilities of executives  

3. A budget includes all of the following except: A. A plan, quantified in monetary terms B. A plan outlining income generated and/or expenditure incurred during a period of time C. A plan which guarantees future profit D. A plan outlining capital employed in obtaining a given objective  

2. A cash budget does not include tax and interest to be paid FALSE

1. A fixed budget is most practical where levels of production and sales fluctuate FALSE