Certified Management Accountant Budgeting and Forecasting 3

Question 1

The 'beyond budgeting' model primarily advocates for:

Accepted Answer

Replacing fixed annual budgets with adaptive, relative performance targets and rolling forecasts

Answer

Beyond budgeting proposes abandoning rigid annual fixed budgets in favor of dynamic targets benchmarked against peers and continuous rolling forecasts that respond to changing conditions.

Question 2

A production budget is calculated as:

Accepted Answer

Budgeted sales units + desired ending inventory – beginning inventory

Answer

Units to produce = budgeted sales + desired ending finished goods inventory − beginning finished goods inventory, ensuring sufficient stock is available.

Question 3

Which of the following best describes an operating budget?

Accepted Answer

A short-term budget covering revenues and expenses for routine business operations

Answer

An operating budget covers the day-to-day revenues and operating expenses (sales, COGS, SG&A) for a defined period, typically one year.

Question 4

When a company's actual material cost is higher than the flexible budget amount, the result is a:

Accepted Answer

Unfavorable spending variance

Answer

When actual costs exceed the flexible budget (adjusted for actual volume), the variance is unfavorable because the company spent more than expected per unit of activity.

Question 5

Incremental budgeting is criticized primarily because it:

Accepted Answer

Perpetuates inefficiencies by treating prior-year spending as automatically justified

Answer

Incremental budgeting simply adds a percentage to last year's figures without questioning whether the base spending was necessary or efficient.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Budgeting and Forecasting 3