Budgetary Control M.O.P.

A budget is a financial plan or statement which shows specific objectives or targets that a business hopes to achieve over a given period of time

• True

• False

Firms make budgets for ALL of the following reasons EXCEPT:

• To set targets and business objectives

• Allows the firms to identify and assess alternative courses of action

• To monitor performance of the business over time

• To provide reports to their customers

ALL of the following are advantages of budgeting EXCEPT:

• Acts as a guide for managers in the achievement of business objectives

• Fosters communication and coordination within the organization

• They may be inappropriate for current conditions

• Provides control for income and expenditure

Which of the following is a drawback of budgeting:

• Acts as a guide for managers in the achievement of business objectives

• Allows for the proper employment of capital

• Fosters communication and coordination within the organization

• A stringent budget may lead to inflexibility in the adaptation of change

Budgets are categorized under three main headings.

• True

• False

Budgets are categorized as ALL of the following EXCEPT:

• Fixed Budget

• Inflexible Budget

• Zero-based Budget

• Flexible Budget

Which of the following statements best describes a fixed budget?

• One that is adjusted when there are changes in the business environment.

• One that is adjusted as fixed and variable costs change.

• One that is drafted based on the needs of each activity.

• One that remains the same even if the activity level of the firm is different from the projected figures.

Which of the following statements best describes a zero-based budget?

• One that is adjusted when there are changes in the business environment.

• One that is adjusted as fixed and variable costs change.

• One that is drafted based on the needs of each activity.

• One that remains the same even if the activity level of the firm is different from the projected figures.

Which of the following statements best describes a flexible budget?

• One that is adjusted when there are changes in the business environment.

• One that is weighed against its benefits to the business.

• One that is drafted based on the needs of each activity.

• One that remains the same even if the activity level of the firm is different from the projected figures.

A Sales budget is usually the first budget to be prepared by the business.

• True

• False