AAT L4 Management Accounting Budgeting 2

Question 1

A company uses a rolling budget covering January to December 2026. At the end of March 2026, what period will the revised rolling budget cover?

Accepted Answer

April 2026 to March 2027

Answer

A rolling budget always maintains a fixed forward-looking period (typically 12 months). At the end of March 2026, the expired quarter is dropped and a new quarter (January-March 2027) is added, giving April 2026 to March 2027.

Question 2

The sales budget shows expected sales of £500,000. 60% of sales are on credit. Credit customers pay: 70% in the month of sale, 25% the following month, 5% irrecoverable. What is the budgeted cash receipt from credit sales in the month of sale?

Accepted Answer

£210,000

Answer

Credit sales = 60% x £500,000 = £300,000. Cash received in the month of sale = 70% x £300,000 = £210,000.

Question 3

Which of the following is a disadvantage of incremental budgeting?

Accepted Answer

It perpetuates past inefficiencies into future budgets

Answer

Incremental budgeting takes the previous period's budget as the starting point and adjusts for expected changes. Any inefficiencies or wasteful spending embedded in the prior budget are carried forward without challenge.

Question 4

A company's budget committee is responsible for:

Accepted Answer

Coordinating the budget preparation process and resolving conflicts between departmental budgets

Answer

The budget committee coordinates the budget process, sets guidelines, reviews departmental submissions, resolves conflicts between competing budget requests, and approves the final master budget.

Question 5

A manufacturing company has budgeted production of 5,000 units. Each unit requires 2.5 hours of direct labour at £14 per hour. What is the total labour budget?

Accepted Answer

£175,000

Answer

Total labour hours = 5,000 x 2.5 = 12,500 hours. Total labour cost = 12,500 x £14 = £175,000.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Management Accounting Budgeting 2