CBS Budget Development & Forecasting 5

Question 1

A nonprofit organization receives a grant restricted to a specific program. In budget development, these funds should be:

Accepted Answer

Tracked separately in a restricted fund budget

Answer

Restricted funds must be budgeted and reported separately to ensure compliance with donor or grantor requirements and legal obligations.

Question 2

Which metric measures how quickly a company converts its budgeted inventory investment into revenues?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover ratio measures how many times inventory is sold and replaced in a period, indicating efficiency of inventory management relative to budget.

Question 3

During budget development, a 'stretch target' is best defined as:

Accepted Answer

An ambitious performance goal that exceeds the baseline forecast to motivate higher achievement

Answer

Stretch targets are deliberately ambitious goals set above baseline forecasts to challenge teams and drive performance improvement.

Question 4

The cash budget differs from the income statement budget primarily because:

Accepted Answer

The cash budget tracks timing of actual cash inflows and outflows, not accrual-based revenues and expenses

Answer

The cash budget focuses on when cash is actually received and paid, while the income statement budget records revenues and expenses on an accrual basis.

Question 5

Which budget variance is calculated by subtracting the flexible budget amount from the actual amount incurred?

Accepted Answer

Flexible budget variance

Answer

The flexible budget variance isolates spending efficiency by comparing actual costs to what costs should have been at the actual activity level.

(CBS) Certified Budget Specialist Practice Test

(CBS) Certified Budget Specialist Practice Test

CBS Budget Development & Forecasting 5