CCA Corporate Budgeting & Forecasting 4

Question 1

A company applies driver-based budgeting. Its customer support cost driver is 'number of support tickets.' If the budget assumes 8,000 tickets at $15 each and 10,000 tickets are actually received, what is the flexible budget allowance for support costs?

Accepted Answer

$150,000

Answer

Flexible budget = Actual driver quantity × Budgeted rate = 10,000 × $15 = $150,000.

Question 2

Which of the following best describes the 'beyond budgeting' philosophy?

Accepted Answer

Replacing fixed annual budgets with adaptive, decentralized management using rolling forecasts and relative targets

Answer

Beyond budgeting advocates replacing rigid annual budgets with dynamic planning tools, relative benchmarks, and empowered frontline decision-making.

Question 3

A company's operating budget projects EBIT of $5M on revenues of $20M. If interest expense is $500K and the tax rate is 25%, what is the budgeted net income?

Accepted Answer

$3,375,000

Answer

EBT = $5M − $0.5M = $4.5M; Net income = $4.5M × (1 − 0.25) = $3,375,000.

Question 4

In a capital budgeting context, which technique explicitly accounts for the time value of money to evaluate mutually exclusive projects?

Accepted Answer

Net present value (NPV)

Answer

NPV discounts all future cash flows at the required rate of return, explicitly incorporating the time value of money in the evaluation.

Question 5

A sensitivity analysis on a sales forecast changes the unit price by ±10% while holding all other variables constant. This technique is used to:

Accepted Answer

Identify which assumptions have the greatest impact on the forecasted outcome

Answer

Sensitivity analysis tests how changes in a single variable affect the outcome, helping managers identify which assumptions are most critical to their forecasts.

(CCA) Certified Corporate Accountant Practice Test

(CCA) Certified Corporate Accountant Practice Test

CCA Corporate Budgeting & Forecasting 4