Certified Management Accountant Budgeting and Forecasting

Question 1

A flexible budget differs from a static budget in that a flexible budget:

Accepted Answer

Adjusts revenues and costs based on actual activity levels

Answer

Is prepared only once per year and never revised

Answer

Uses only fixed costs and ignores variable costs

Answer

Is approved by senior management before the fiscal year begins

Question 2

Under zero-based budgeting (ZBB), each budget period requires managers to:

Accepted Answer

Justify all expenditures from scratch, regardless of prior spending

Answer

Increase the prior year's budget by an inflation factor

Answer

Match budgeted spending to the previous year's actual spending

Answer

Allocate costs based solely on activity drivers

Question 3

A rolling (continuous) budget is best described as one that:

Accepted Answer

Adds a new period as the most recent period expires, maintaining a constant planning horizon

Answer

Covers only the current calendar year and is replaced annually

Answer

Consolidates multiple departmental budgets into a single master budget

Answer

Is prepared using regression analysis to project future sales

Question 4

Which budget is typically prepared first when constructing a master budget for a manufacturing company?

Accepted Answer

Sales budget

Answer

Cash budget

Answer

Production budget

Answer

Direct materials budget

Question 5

A cash budget is primarily used by management to:

Accepted Answer

Forecast periods of cash surplus or shortage to plan financing needs

Answer

Determine the optimal product mix for the upcoming year

Answer

Set selling prices based on full cost absorption

Answer

Allocate overhead costs to individual product lines

Question 6

Kaizen budgeting is most closely associated with:

Accepted Answer

Incorporating continuous improvement targets into the budgeting process

Answer

Building budgets from historical cost data without change

Answer

Using statistical regression to forecast next year's costs

Answer

Allocating overhead based on machine hours alone

Question 7

When actual sales volume differs from budgeted sales volume, the resulting difference in profit is best isolated using a:

Accepted Answer

Sales volume variance

Answer

Static budget variance

Answer

Price variance

Answer

Spending variance