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Business Accounting and Finance

Tony Davies, University of Wales, Lampeter, UK
Brian Pain, University of Luton, UK

Planning and budgeting

Self-test Questions


1	A budget is not
		A)	a part of the strategic management process
		B)	a qualitative statement
		C)	a plan
		D)	a forecast


2	A forecast is not
		A)	a budget
		B)	a prediction of future events
		C)	based on extrapolation of past data
		D)	based on expert opinion


3	Which of the following is not one of the main purposes of a budget?
		A)	planning and control
		B)	the alignment of individual and corporate goals
		C)	to enable a flexibility of approach to company policies
		D)	to optimise the use of scarce resources


4	A production budget is not based on
		A)	the capital expenditure budget
		B)	the gross margin budget
		C)	purchasing policy
		D)	labour policy


5	A flexible budget
		A)	gives managers discretion as to investigations into variances revealed by analysis of actual performance
		B)	gives departmental managers discretion on spending limits
		C)	allows departmental managers to design their own budget reports
		D)	reflects changes in activity levels of the company


6	In a manufacturing company, which budget is the first to be prepared in the budget process?
		A)	the cash flow budget
		B)	the sales budget
		C)	the capital expenditure budget
		D)	the production budget


7	The budget as a tool of control of the business may not be most successful if
		A)	managers are given demanding targets
		B)	there is full communication and participation
		C)	it is based on realistic standards of performance
		D)	budget assumptions are made available to all managers


8	Responsibility centres are departments or organisational functions whose performance is the direct responsibility of specific managers. One type of responsibility centre is a revenue centre, which is responsible for
		A)	profits
		B)	investments and costs
		C)	sales and profits
		D)	sales


9	Key motivational factors in budgeting do not include
		A)	the feedback of information
		B)	correct identification of the blame for below budget performance
		C)	the setting of fair, achievable standards
		D)	training in the budget process


10	Which of the following does not help to minimise the problems encountered in budgeting?
		A)	keeping bad news from the managing director
		B)	encouraging manager participation
		C)	ensuring adequate budget planning
		D)	identifying the responsibility for key performance areas

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