ACCA AK Management Accounting (MA) Budgeting

Question 1

Which of the following best describes a rolling (continuous) budget?

Accepted Answer

A budget that is continuously updated by adding a new period as the most recent period expires

Answer

A budget that is set once and never revised

Answer

A budget prepared from scratch each year with no reference to previous budgets

Answer

A budget that only covers capital expenditure

Question 2

Zero-based budgeting (ZBB) requires managers to:

Accepted Answer

Justify every item of expenditure from a zero base for each new period

Answer

Simply adjust last year's budget by an inflation percentage

Answer

Only budget for new projects and ignore ongoing activities

Answer

Set all budgets at zero and wait for actual costs to emerge

Question 3

What is the principal budget factor?

Accepted Answer

The factor that limits the overall level of activity for the budget period

Answer

The cost that represents the highest proportion of total expenditure

Answer

The budget that is prepared first in the budgeting process regardless of circumstances

Answer

The factor that has no impact on the budget

Question 4

A company budgets to sell 10,000 units. Opening inventory of finished goods is 800 units and the desired closing inventory is 1,200 units. How many units must be produced?

Accepted Answer

10,400 units

Answer

9,600 units

Answer

10,000 units

Answer

11,200 units

Question 5

Which of the following is a disadvantage of incremental budgeting?

Accepted Answer

It may perpetuate past inefficiencies and unnecessary spending

Answer

It requires extensive management time to prepare

Answer

It automatically eliminates inefficiencies from prior periods

Answer

It forces managers to justify every item of expenditure

Question 6

A fixed budget is most useful for controlling costs when:

Accepted Answer

Activity levels remain constant and predictable

Answer

Activity levels fluctuate significantly from period to period

Answer

The organisation operates in a highly volatile market

Answer

There are many cost centres with different cost behaviours