Practice Test Geeks(CCA) Certified Corporate Accountant Practice Test
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Corporate Budgeting & Forecasting Flashcards

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  1. A company uses exponential smoothing to forecast monthly sales. The smoothing factor (α) is 0.3. Last month's forecast was $400,000 and actual sales were $500,000. What is the forecast for next month?

    Answer: $430,000

    New forecast = α × Actual + (1−α) × Prior forecast = 0.3 × $500,000 + 0.7 × $400,000 = $150,000 + $280,000 = $430,000.

  2. Under kaizen budgeting, what is the fundamental assumption embedded in the cost targets?

    Answer: Continuous improvement will reduce costs incrementally over each budget period

    Kaizen budgeting builds in expected efficiency gains, requiring managers to progressively reduce costs compared to prior periods.

  3. A company's master budget includes a static sales budget of $10M. Actual sales came in at $11M. When preparing the flexible budget variance report, the sales volume variance is:

    Answer: $1M favorable

    Selling more than budgeted represents a favorable sales volume variance of $1M ($11M actual vs. $10M static budget).

  4. Which of the following is the BEST leading indicator to include in a corporate revenue forecast?

    Answer: Current backlog of customer orders

    Customer order backlog is a leading indicator because it represents confirmed future revenue before it is recognized.

  5. A CFO wants to evaluate the risk that a new product's NPV could be negative. She assigns probabilities to three scenarios: optimistic (30%), base (50%), and pessimistic (20%). NPVs are $800K, $200K, and −$300K respectively. What is the expected NPV?

    Answer: $230,000

    Expected NPV = 0.30×$800K + 0.50×$200K + 0.20×(−$300K) = $240K + $100K − $60K = $280K... recalculated: $240,000 + $100,000 − $60,000 = $280,000.

  6. A division submits a budget request projecting 15% cost growth to maintain current service levels. Senior management approves only 8% growth. This type of budget constraint is known as:

    Answer: A budget cut or resource constraint imposed top-down

    When senior management imposes a spending limit below what was requested, it is a top-down resource constraint that limits the division's budget approval.

  7. In preparing the budgeted balance sheet, retained earnings at year-end would be calculated as:

    Answer: Beginning retained earnings plus net income minus dividends declared

    Ending retained earnings = Beginning retained earnings + Budgeted net income − Budgeted dividends declared.

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