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This test consists of 10 questions designed to test your understanding of methods of budgeting The...
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Transcript of This test consists of 10 questions designed to test your understanding of methods of budgeting The...
![Page 1: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/1.jpg)
Budgeting Test
This test consists of 10 questions designed to test your understanding of methods of budgeting
The links provide you with a choice of answer, along with explanations and solutions.
You will need a calculator to complete this test.
![Page 2: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/2.jpg)
Question 1.
A firms Budget for raw materials is £45,000, actual spending is £49,300. What is the variance?
a. £4,300A
b. £94,300A
c. £4,300F
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Correct.
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In an expenditure budget, an overspend is always an Adverse (A) Variance and you take budgeted figure from actual spend. Try again.
![Page 5: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/5.jpg)
In an expenditure budget, an overspend is always an Adverse (A) Variance and you take budgeted figure from actual spend. Try again.
![Page 6: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/6.jpg)
Question 2.
A firms variances from budget are; Revenue £4,700A, raw materials £5,100F, labour £2,100A. What is the total variance?
A. £11,900F
B. £1,700F
C. £1,700A
![Page 7: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/7.jpg)
Add together each Adverse variance, then each Favourable variance and take one from the other. A minus figure will be a Favourable variance
![Page 8: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/8.jpg)
Add together each Adverse variance, then each Favourable variance and take one total from the other. A minus figure will be a Favourable variance
![Page 9: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/9.jpg)
Correct
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Question 3.
Which of the following is likely to lead to a favourable budget variance?
A. Increased competition
B. A major competitor going bust
C. An increase in the cost of raw materials
![Page 11: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/11.jpg)
This will probably cause an adverse sales variance.
![Page 12: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/12.jpg)
Correct. This will probably cause a favourable sales variance
![Page 13: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/13.jpg)
This will cause an adverse variance in thecosts of sales budget
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Question 4.
Which of the following is likely to lead to an adverse budget variance?
A. A fall in wage inflation
B. An increase in consumer spending
C. An increase in raw material prices
![Page 15: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/15.jpg)
This will lead to a favourable variance.
![Page 16: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/16.jpg)
This will lead to a favourable sales variance
![Page 17: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/17.jpg)
Correct.
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Question 5.
Which of the following most closely describes Zero Budgeting?
A. Management increasing budgets in line with inflation
B. Managers having to justify every penny of their budget.
![Page 19: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/19.jpg)
Wrong.Zero budgeting always starts with a clean sheet.
![Page 20: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/20.jpg)
Correct
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Question 6.
Inflation leads to an increase in raw material prices of 7%, when the budgeted increase was 5%. Last years cost of raw materials was £49,000. What will be the budget variance?
A. £980A
B. £2450F
C. £3430A
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Correct. The answer is 2% of the budget
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The budget has increased so we have anadverse variance. The difference is 2% of BudgetTry again
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The budget has increased so we have anadverse variance. The difference is 2% of BudgetTry again
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Question 7.
Variance Analysis is used to?
A. Improve predictions of profitability.
B. Improve management control of departments
1. Both
2. B only
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Wrong. There are many advantages to budgeting, these are 2 examples of these advantages
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Correct. There are many advantages to budgeting, these are 2 examples of these advantages.
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Question 8.
Which of the following can result from a poorly managed budgeting process?
A. Higher inflation
B. Demotivated staff
C. Increased variances
1. A and B
2. B and C
3. All of the above.
![Page 29: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/29.jpg)
The firm has no control over inflation! Though inflation can cause variances.
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Correct. Firms must be careful about howthey approach the budgeting process, otherwise disadvantages can outweigh advantages,
![Page 31: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/31.jpg)
The firm has no control over inflation! Though inflation can cause variances.
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Question 9.
A revenue budget is set which allows for predicted price increases of 3% over the current year, with no increase in sales volume. Sales for the previous year were £56,000. Actual sales achieved were £59,000. What is the variance?
A. £3,000F
B. £2,100A
C. £1320F
![Page 33: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/33.jpg)
Calculate 3% of £56,000, and takethis from the difference between £56,000and £59,000. As this is a revenue budget a positive answer is a Favourable variance
![Page 34: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/34.jpg)
Calculate 3% of £56,000, and takethis from the difference between £56,000and £59,000. As this is a revenue budget a positive answer is a Favourable variance
![Page 35: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/35.jpg)
Correct You have calculated 3% of £56,000, and taken this from the difference between £56,000and £59,000. As this is a revenue budget a positive answer is a Favourable variance
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Question 10.
A budget variance of £14,000A occurs on a labour budget. Which of the following could have caused this.
A. A planned 5% wage increase
B. Increase in overtime worked
C. Sales 10% above budget
1. A and C
2. All of the above
3. B and C
![Page 37: This test consists of 10 questions designed to test your understanding of methods of budgeting The links provide you with a choice of answer, along with.](https://reader038.fdocuments.us/reader038/viewer/2022110403/56649e705503460f94b6e6d9/html5/thumbnails/37.jpg)
A planned wage increase will be budgeted for!
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Two are correctbut a planned wage increase will be budgeted for!
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Correct. A planned wage increase will be budgeted for! Whilst the other 2 will not be built into the budget.
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You have now completed the test.