Finance for Non-Finance Managers Budgeting and Variance Analysis 1

Question 1

What is a budget in a business context?

Accepted Answer

A quantified financial plan for a future period

Answer

A historical report of last year's spending

Answer

A list of all company assets

Answer

A record of tax obligations

Question 2

What does a favorable variance mean?

Accepted Answer

Actual results were better than budgeted

Answer

Actual costs were higher than budgeted

Answer

The budget was not approved

Answer

Revenue was lower than expected

Question 3

An adverse (unfavorable) variance on expenses means:

Accepted Answer

Actual expenses were more than budgeted

Answer

Actual expenses were less than budgeted

Answer

The expense category was not included in the budget

Answer

Expenses matched the budget exactly

Question 4

Which type of budget adjusts for actual activity levels rather than remaining fixed?

Accepted Answer

Flexible budget

Answer

Zero-based budget

Answer

Static budget

Answer

Capital budget

Question 5

Zero-based budgeting (ZBB) requires managers to:

Accepted Answer

Justify every line item from scratch each period

Answer

Carry over last year's budget with small adjustments

Answer

Set all budget targets at zero and add only capital costs

Answer

Use only historical data to predict future costs

Question 6

What is the master budget?

Accepted Answer

An integrated summary of all functional budgets into one financial plan

Answer

A budget prepared only for the senior management team

Answer

The largest departmental budget in the company

Answer

A budget that cannot be revised once approved