CFC Budgeting & Forecasting 5

Question 1

Which of the following best describes a 'top-down' budgeting approach?

Accepted Answer

Senior management sets overall targets that are then allocated to departments

Answer

Top-down budgeting has senior leadership establish high-level targets that are then disaggregated and communicated down to operating departments.

Question 2

A financial controller notices that the company's selling and administrative expense budget is consistently overstated. The most likely corrective action is to:

Accepted Answer

Switch from incremental to zero-based budgeting

Answer

Persistent over-budgeting often signals embedded slack; ZBB forces managers to justify each dollar, eliminating padding built into historical baselines.

Question 3

What is the key assumption underlying the high-low method for cost estimation?

Accepted Answer

There is a linear relationship between cost and activity between the highest and lowest data points

Answer

The high-low method assumes linearity between the highest and lowest activity levels and uses only those two data points to estimate fixed and variable cost components.

Question 4

An operating budget that uses contribution margin analysis is primarily designed to:

Accepted Answer

Highlight the relationship between volume, variable costs, and profit

Answer

Contribution margin budgeting separates variable from fixed costs, making it easier to analyze the profit impact of volume changes and inform break-even decisions.

Question 5

When actual fixed overhead costs exceed the budgeted fixed overhead, the resulting variance is:

Accepted Answer

Unfavorable fixed overhead spending variance

Answer

An unfavorable fixed overhead spending variance occurs when actual fixed overhead costs are higher than the budgeted amount, indicating overspending.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Budgeting & Forecasting 5