CPM Budgeting & Variance Analysis 2

Question 1

A manager notices that actual labor costs exceeded the flexible budget by $12,000. This difference is best described as a:

Accepted Answer

Unfavorable budget variance

Answer

When actual costs exceed budgeted costs, the result is an unfavorable (adverse) budget variance.

Question 2

Which budgeting method requires managers to justify every expense from zero each budget cycle rather than using prior-year figures as a baseline?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting (ZBB) starts from a 'zero base' and requires all expenses to be justified anew each period.

Question 3

The materials price variance is calculated by multiplying the actual quantity purchased by the difference between:

Accepted Answer

Actual price and standard price

Answer

Materials price variance = Actual Quantity × (Actual Price − Standard Price), isolating the cost difference per unit purchased.

Question 4

A rolling (continuous) budget is best described as one that:

Accepted Answer

Always covers a fixed future period by adding a new period as one ends

Answer

A rolling budget continuously extends the planning horizon—when one month ends, a new month is added so a full period (e.g., 12 months) is always covered.

Question 5

Which variance measures the difference between budgeted fixed overhead and the fixed overhead absorbed by actual production?

Accepted Answer

Fixed overhead volume variance

Answer

The fixed overhead volume variance arises when actual production output differs from budgeted output, causing under- or over-absorption of fixed overhead.

(CPM) Certified Professional Manager Practice Test

(CPM) Certified Professional Manager Practice Test

CPM Budgeting & Variance Analysis 2