COA COA Financial Management & Budgeting 5

Question 1

When preparing a departmental budget, which expense would typically be classified as a direct cost?

Accepted Answer

Office supplies purchased specifically for that department

Answer

Direct costs are directly traceable to a specific department or cost center, such as supplies purchased exclusively for that department's use.

Question 2

What is the primary purpose of a budget variance report?

Accepted Answer

To compare actual spending against budgeted amounts and identify differences

Answer

A budget variance report highlights the differences between planned budget figures and actual expenditures, enabling corrective action.

Question 3

An unfavorable budget variance in office supplies means the department:

Accepted Answer

Spent more than budgeted

Answer

An unfavorable (or adverse) variance occurs when actual costs exceed the budgeted amount, indicating overspending.

Question 4

Which of the following best describes 'accrual basis' accounting?

Accepted Answer

Revenue is recorded when earned and expenses when incurred, regardless of cash flow

Answer

Accrual basis accounting recognizes revenue when earned and expenses when incurred, matching them to the period they relate to regardless of cash movement.

Question 5

A company's gross profit is calculated by subtracting which of the following from net sales?

Accepted Answer

Cost of goods sold

Answer

Gross profit = Net Sales minus Cost of Goods Sold (COGS), representing profit before operating expenses are deducted.

(COA) Certified Office Administration Practice Test

(COA) Certified Office Administration Practice Test

COA COA Financial Management & Budgeting 5