CBS Financial Planning & Analysis 3

Question 1

Which component of the cash budget accounts for the timing difference between when sales are made and when cash is actually received?

Accepted Answer

Collections from accounts receivable

Answer

Collections from accounts receivable adjust for the lag between credit sales and actual cash inflows based on collection patterns.

Question 2

If a company budgets fixed overhead at $120,000 for 10,000 units but actually produces 8,000 units, what is the fixed overhead volume variance?

Accepted Answer

$24,000 unfavorable

Answer

The volume variance is (budgeted − actual units) × standard fixed overhead rate: (10,000 − 8,000) × $12 = $24,000 unfavorable.

Question 3

A company wants to achieve a net income of $200,000. Fixed costs are $300,000 and contribution margin ratio is 40%. What is the required sales revenue?

Accepted Answer

$1,250,000

Answer

Required sales = (Fixed costs + Target profit) ÷ CM ratio = ($300,000 + $200,000) ÷ 0.40 = $1,250,000.

Question 4

Which type of financial analysis compares each line item on an income statement as a percentage of net sales?

Accepted Answer

Common-size analysis

Answer

Common-size analysis expresses each financial statement item as a percentage of a base figure (sales for income statements, total assets for balance sheets).

Question 5

In capital budgeting, the payback period method is criticized mainly because it:

Accepted Answer

Ignores cash flows after the payback date and the time value of money

Answer

The payback period ignores profitability beyond the recovery point and does not discount future cash flows for the time value of money.

(CBS) Certified Budget Specialist Practice Test

(CBS) Certified Budget Specialist Practice Test

CBS Financial Planning & Analysis 3