CBS Budget Development & Forecasting 4

Question 1

Which budgeting approach allocates resources based on the expected volume and cost of specific activities rather than by department or cost center?

Accepted Answer

Activity-based budgeting (ABB)

Answer

Activity-based budgeting links resource allocation directly to the activities that drive costs, improving accuracy and identifying inefficiencies.

Question 2

A manager is evaluating budget assumptions and finds that a 10% change in raw material prices causes a 6% change in total costs. This type of analysis is known as:

Accepted Answer

Sensitivity analysis

Answer

Sensitivity analysis tests how changes in key assumptions (like input prices) affect budget outcomes, revealing which variables carry the most risk.

Question 3

In the context of budget development, a contingency reserve is best described as:

Accepted Answer

Funds set aside to cover unforeseen risks or cost overruns

Answer

A contingency reserve provides a financial buffer for unexpected costs or risks identified during budget planning.

Question 4

Which forecasting approach is MOST appropriate when no historical data exists for a new product line?

Accepted Answer

Qualitative judgment methods such as market research

Answer

When historical data is unavailable, qualitative methods like market research, expert opinion, and focus groups provide the basis for forecasts.

Question 5

What does the term 'budget calendar' refer to in budget development?

Accepted Answer

A schedule that defines deadlines and responsibilities for each step of the budget process

Answer

A budget calendar outlines the timeline, milestones, and responsible parties for completing each phase of the annual budget cycle.

(CBS) Certified Budget Specialist Practice Test

(CBS) Certified Budget Specialist Practice Test

CBS Budget Development & Forecasting 4