CFC Budgeting & Forecasting 4

Question 1

Scenario analysis in financial forecasting is best described as:

Accepted Answer

Evaluating multiple 'what-if' outcomes under different assumptions

Answer

Scenario analysis examines how financial results change under different sets of assumptions (e.g., base, optimistic, pessimistic), helping management plan for uncertainty.

Question 2

The Delphi method for forecasting relies on:

Accepted Answer

Iterative rounds of expert opinion until consensus is reached

Answer

The Delphi method gathers judgments from a panel of experts through successive questionnaire rounds, refining estimates toward consensus.

Question 3

Which metric is most useful for evaluating whether a budget is achievable and appropriately challenging?

Accepted Answer

Comparison of budget assumptions to external benchmarks

Answer

Comparing budget assumptions to industry benchmarks and economic data helps assess whether targets are realistic and appropriately stretch performance.

Question 4

A direct materials budget is built upon the production budget because:

Accepted Answer

The quantity of materials needed depends on planned production units

Answer

The direct materials budget calculates required purchases based on the units to be produced, so the production budget must be finalized first.

Question 5

When a company's actual revenue exceeds its static budget revenue, the resulting variance is classified as:

Accepted Answer

Favorable revenue variance

Answer

Actual revenue above budget is a favorable variance, indicating better-than-planned performance on the revenue line.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Budgeting & Forecasting 4