CFC Budgeting & Forecasting 2

Question 1

A company uses zero-based budgeting (ZBB). What is the primary difference from traditional incremental budgeting?

Accepted Answer

Every expense must be justified from scratch each period

Answer

ZBB requires managers to justify all expenditures from zero each budget cycle rather than using prior-year figures as a starting point.

Question 2

Which forecasting method uses a weighted average of past data, giving more weight to recent observations?

Accepted Answer

Exponential smoothing

Answer

Exponential smoothing assigns exponentially decreasing weights to older observations, making recent data more influential in the forecast.

Question 3

A rolling forecast differs from a static annual budget primarily because it:

Accepted Answer

Is updated continuously to maintain a fixed forward-looking horizon

Answer

A rolling forecast extends the planning horizon forward (e.g., always 12 months ahead) as each period closes, unlike a static budget set once per year.

Question 4

In a master budget, which component is prepared first to drive all other budgets?

Accepted Answer

Sales budget

Answer

The sales budget is the starting point of the master budget because all other operating budgets depend on projected sales volume.

Question 5

The production budget formula for required units is:

Accepted Answer

Budgeted sales + ending inventory − beginning inventory

Answer

Required production = Budgeted sales + Desired ending inventory − Beginning inventory, ensuring enough units are produced to meet demand and inventory targets.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Budgeting & Forecasting 2