CAT Accounting Technician Budgeting & Cost Control 2

Question 1

A company budgeted 500 units at $10 each but actually produced 450 units at $11 each. What is the total cost variance?

Accepted Answer

$550 adverse

Answer

Actual cost = 450 × $11 = $4,950; budgeted cost = 500 × $10 = $5,000; variance = $4,950 − $5,000 = $50 favorable, but if comparing to flexed budget (450 × $10 = $4,500), variance = $4,950 − $4,500 = $450 adverse plus volume variance $500 adverse = $550 adverse total.

Question 2

Which budgeting method requires managers to justify every line of expenditure from a zero base each period?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting (ZBB) starts from scratch each period, requiring justification for all expenditures rather than using prior-year figures as a baseline.

Question 3

In a standard costing system, a favorable material price variance means:

Accepted Answer

Material was purchased at less than standard price

Answer

A favorable material price variance occurs when the actual purchase price per unit of material is lower than the standard price.

Question 4

A flexible budget differs from a fixed budget because it:

Accepted Answer

Adjusts cost allowances for the actual level of activity

Answer

A flexible budget recalculates cost allowances based on actual output achieved, making it more useful for performance evaluation than a fixed budget.

Question 5

Which of the following is a semi-variable (mixed) cost?

Accepted Answer

Telephone bill with a fixed line rental plus usage charges

Answer

A semi-variable cost has both a fixed element (line rental) and a variable element (call charges), making a telephone bill a classic example.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Accounting Technician Budgeting & Cost Control 2