CPM Budgeting & Variance Analysis 5

Question 1

Which of the following best describes an 'imposed' (top-down) budget?

Accepted Answer

Targets are set by senior management and communicated downward without subordinate input

Answer

An imposed budget is dictated by upper management, which sets targets without meaningful input from the managers who must meet them.

Question 2

A favorable fixed overhead expenditure variance means that:

Accepted Answer

Actual fixed overhead was less than budgeted fixed overhead

Answer

A favorable fixed overhead expenditure variance arises when the actual fixed overhead costs incurred are lower than the amount budgeted for the period.

Question 3

When actual revenue exceeds budgeted revenue for a given period, the result is a:

Accepted Answer

Favorable revenue variance

Answer

Earning more revenue than budgeted is a favorable outcome, meaning actual performance exceeded the plan on the revenue side.

Question 4

The 'management by exception' principle in budgetary control means that managers should:

Accepted Answer

Focus analysis and corrective action on variances that exceed a predetermined materiality threshold

Answer

Management by exception directs managerial attention to significant deviations from plan—both favorable and unfavorable—so time and effort are spent where they matter most.

Question 5

A company produced 5,000 units but budgeted for 6,000. Which of the following is the most direct result?

Accepted Answer

An unfavorable fixed overhead volume variance due to under-absorption

Answer

Producing fewer units than budgeted means fixed overhead is spread over fewer units, causing under-absorption and an unfavorable fixed overhead volume variance.

(CPM) Certified Professional Manager Practice Test

(CPM) Certified Professional Manager Practice Test

CPM Budgeting & Variance Analysis 5