Certified Management Accountant Budgeting and Forecasting 2

Question 1

Activity-based budgeting (ABB) improves on traditional budgeting primarily by:

Accepted Answer

Linking resource consumption to activities and cost drivers rather than departments alone

Answer

Limiting the budget to a single cost pool for simplicity

Answer

Requiring every cost to be approved by the CFO individually

Answer

Replacing variance analysis with balanced scorecard metrics

Question 2

Budget slack (also called budgetary slack) occurs when managers:

Accepted Answer

Intentionally underestimate revenues or overestimate costs to create an easier target

Answer

Submit budgets that are more ambitious than achievable targets

Answer

Use stretch goals to motivate higher performance

Answer

Fail to submit their budgets before the deadline

Question 3

In a participative (bottom-up) budgeting process, budgets are primarily:

Accepted Answer

Developed by lower-level managers and submitted upward for approval

Answer

Set by top executives and imposed on lower-level managers

Answer

Based entirely on prior-year actuals with no management input

Answer

Prepared by external consultants to ensure objectivity

Question 4

Pro forma financial statements in the budgeting context are best described as:

Accepted Answer

Projected financial statements prepared to reflect the expected results of planned activities

Answer

Audited statements required by the SEC for public companies

Answer

Statements prepared under IFRS rather than US GAAP

Answer

Historical statements restated to exclude non-recurring items

Question 5

Which forecasting method uses the relationship between a dependent variable and one or more independent variables to predict future values?

Accepted Answer

Regression analysis

Answer

Moving average

Answer

Exponential smoothing

Answer

Delphi method

Question 6

The Delphi method of forecasting relies on:

Accepted Answer

Iterative anonymous expert consensus to converge on a forecast

Answer

Extrapolating a time series trend line into the future

Answer

Calculating a weighted average of recent historical data

Answer

Running Monte Carlo simulations of possible outcomes

Question 7

Sensitivity analysis in budgeting is used to:

Accepted Answer

Examine how changes in key assumptions affect budgeted outcomes

Answer

Ensure budget assumptions comply with GAAP

Answer

Distribute overhead costs to products using activity rates

Answer

Calculate the break-even point for a new product launch