CAT Accounting Technician Budgeting & Cost Control 3

Question 1

Which of the following best describes 'budget slack'?

Accepted Answer

The deliberate overestimation of costs or underestimation of revenues by managers

Answer

Budget slack occurs when managers intentionally build in extra cost allowances or reduce revenue targets to make their budgets easier to achieve.

Question 2

In absorption costing, which costs are included in the cost of inventory?

Accepted Answer

Both fixed and variable production costs

Answer

Absorption costing includes both fixed and variable production overheads in product cost, unlike marginal costing which only includes variable production costs.

Question 3

A labour efficiency variance is calculated as:

Accepted Answer

(Standard hours − Actual hours) × Standard rate

Answer

Labour efficiency variance = (Standard hours for actual output − Actual hours worked) × Standard labour rate per hour.

Question 4

What is the purpose of a cash budget?

Accepted Answer

To plan and monitor cash inflows and outflows

Answer

A cash budget projects expected cash receipts and payments to ensure the business has sufficient liquidity and to identify potential cash shortfalls.

Question 5

Contribution per unit is calculated as:

Accepted Answer

Selling price minus variable cost per unit

Answer

Contribution = Selling price per unit − Variable cost per unit; it represents the amount each unit contributes toward covering fixed costs and generating profit.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Accounting Technician Budgeting & Cost Control 3