CBS Financial Planning & Analysis 2

Question 1

Which budgeting method builds each budget period from zero, requiring all expenses to be justified regardless of prior-year spending?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires every line item to be justified from scratch each cycle, eliminating automatic carryover of prior-year expenditures.

Question 2

A company's operating budget shows revenue of $500,000 and total expenses of $420,000. What is the operating income?

Accepted Answer

$80,000

Answer

Operating income equals revenue minus total expenses: $500,000 − $420,000 = $80,000.

Question 3

Which variance arises when actual labor hours worked differ from the standard hours allowed for actual production?

Accepted Answer

Labor efficiency variance

Answer

Labor efficiency variance measures the difference between actual hours worked and standard hours allowed, multiplied by the standard rate.

Question 4

In a master budget, which budget is typically prepared FIRST because it drives all other operating budgets?

Accepted Answer

Sales budget

Answer

The sales budget is prepared first because projected sales volumes drive production, purchasing, labor, and overhead budgets.

Question 5

What does a flexible budget do that a static budget does not?

Accepted Answer

Adjusts cost allowances to actual activity levels

Answer

A flexible budget recalculates budget figures at the actual level of activity, allowing for more meaningful variance analysis.

(CBS) Certified Budget Specialist Practice Test