Reference no: EM132470559

Question 1: Which is NOT a valid purpose of budgets?

1. Assessing the performance of an organization
2. Determining the value of a company
3. Authorization of expenditure
4. Motivation of staff

Question 2: Which is the usual logical sequence of constructing functional budgets?

1. Agree level of sales volumes and prices, calculate production levels, agree raw material purchases, set raw material usage.
2. Agree level of sales volumes and prices, calculate production levels, set raw material usage, agree raw material purchases.
3. Calculate production levels, agree level of sales volumes and prices, agree raw material purchases, set raw material usage.
4. Calculate production level, set raw material usage, agree raw material purchases, agree level of sales volumes and prices.

Question 3: Which is NOT an example of a limiting factor?

1. Head office allocated costs
2. Machine capacity
3. Raw material quantities
4. Sales volume

Question 4: Calculate the production budget from the following data: sales 35,780 units; opening inventory 3,548 units; closing inventory 4,286 units.

1. 43,614 units
2. 27,946 units
3. 36,518 units
4. 35,042 units

Question 5: What is meant by a zero-based budget?

1. The variable elements of a budget, excluding fixed costs
2. A budget prepared from first principles
3. The level of budgeted overheads, if there were no sales
4. A budget which breaks even

Question 6: Which can be considered to be an advantage of a top-down budget?

1. Cost effective to produce as it involves only a few people with less negotiations
2. Motivates staff through participation
3. Uses the knowledge of all staff to build a fair budget
4. Devolves responsibility down the organization, through employee involvement

Question 7: What would be the most likely cause of a favourable material price variance together with an unfavourable material quantity variance?

1. A labour efficiency problem
2. The purchase and use of lower than standard quality of material
3. The purchase and use of higher than standard quality of material
4. Machine efficiency problem