CA CA Budgeting & Forecasting

Question 1

What is a 'master budget' in managerial accounting?

Accepted Answer

A comprehensive financial plan integrating all individual subsidiary budgets

Answer

The largest departmental spending plan in the organization

Answer

The budget formally approved by the board of directors

Answer

A budget covering only capital expenditure projects

Question 2

Which budgeting approach requires all expenditures to be justified from scratch each period, starting from a zero base?

Accepted Answer

Zero-based budgeting

Answer

Incremental budgeting

Answer

Activity-based budgeting

Answer

Rolling budgeting

Question 3

What is 'variance analysis' in the context of the budgeting process?

Accepted Answer

Comparing actual results to budgeted amounts to identify and explain differences

Answer

Measuring statistical variability in financial data sets

Answer

Analyzing cost behavior patterns across departments

Answer

Evaluating alternative investment scenarios

Question 4

A 'favorable variance' in a cost budget occurs when:

Accepted Answer

Actual costs are less than the budgeted amount

Answer

Actual costs exceed the budgeted amount

Answer

Revenue exceeds projected levels

Answer

Production volume surpasses the budgeted target

Question 5

In the master budgeting process, which budget is typically prepared first because it drives all other budgets?

Accepted Answer

The sales budget

Answer

The capital expenditure budget

Answer

The cash budget

Answer

The administrative expense budget

Question 6

What is 'participative budgeting' (also called bottom-up budgeting)?

Accepted Answer

A process where lower-level managers participate in setting their own budget targets

Answer

A budgeting process where costs are allocated based on activity cost drivers

Answer

A budgeting approach performed by external management consultants

Answer

Budgets benchmarked against industry peer performance