Which of the following objectives is not a primary purpose of preparing a budget?

18 Questions  |  By OnlineSmartClass | Last updated: Mar 18, 2022 | Total Attempts: 588

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Budgetary control is a system in which actual income and spending are compared with planned income and spending so a planner can see if they should change some things on the budget to make a profit. How much do you know about budgetary control? Take the quiz and test your understanding.

• 1. 

  Negative feedback may defined as

  • A. 

    Providing misleading information to the management

  • B. 

    Seeking to dampen the effect of any fluctuation from budget

  • C. 

    Reporting only negative or adverse variances from budget.

  • D. 

    Information which will reduce the level of expenditure.

• 2. 

  The level of attainment in the budget refer to

  • A. 

    The extent to which actual cost differ from that budgeted.

  • B. 

    The performance of employees and management.

  • C. 

    The level of operating standard at which the budget is set

  • D. 

    The volume of output achieved

• 3. 

  Which of the following is a correct definition of the principal budget factor

  • A. 

    The factor which limits the activities of undertaking.

  • B. 

    That factor which maximize sales.

  • C. 

    The factor which most members feel is important.

  • D. 

    The amount of cash available during the budget period.

• 4. 

  The direct material usage budget and direct material purchases budget differ because of which of the following?

  • A. 

    The level of material scrap forecast occur.

  • B. 

    The level of efficiency of men or machines.

  • C. 

    A change in the level of finished goods stock

  • D. 

    A planned change in the level of material stock

• 5. 

  Product unit are produced at the rate of 3 units per useful direct labour hour. Direct labour idle time is 10% of hour paid for. Sales of 500 units are planned and finished goods stock is budget to rise by 40 units. Which of the following is direct labour budget (hours)

  • A. 

    1,620 hours

  • B. 

    162 hours

  • C. 

    200 hours

  • D. 

    180 hours

• 6. 

  A cost item varies in proportion to man-hours. The basic budget is set as Rs 1,000 when 100 man-hours are planned. What variance is reported when actual expenditure is Rs. 1,050 and 100 man- hours are worked, when a fixed budgeting system is in operation?

  • A. 

    Rs. 50(f)

  • B. 

    Rs. 10(a)

  • C. 

    Rs. 155(a)

  • D. 

    Rs. 50(a)

• 7. 

  A budget for direct material cost is set at Rs. 5,000 for 1,000 kg. of  product. Actual cost is Rs. 5,400. A flexible budgeting system is in operation. What variance is reported where actual production is 1,200 kg and it is budgeted that all material will be obtained at a 5% discount where total production is in excess of 1,100 kg?

  • A. 

    Rs.400 (a)

  • B. 

    Rs.300 (f)

  • C. 

    Rs. 100(f)

  • D. 

    Rs.900(f)

• 8. 

  A common reason why a person may fail to attain a target set for him by his superior is because he

  • A. 

    Did not know he had a target.

  • B. 

    Felt the target was to difficult

  • C. 

    Has no respect for his superior

  • D. 

    Was not given enough time for the job.

• 9. 

  Lack of goal congruence will usually result in:

  • A. 

    Individual managers not attempting to profit maximize in their own departments

  • B. 

    Coordination of effort between department.

  • C. 

    Significant inflation of budgets through budget padding

  • D. 

    The company’s profitability being lower than anticipated.

• 10. 

  Which of the following objectives is not a primary purpose of preparing a budget?

  • A. 

    To provide a basis for comparison of actual performance.

  • B. 

    To communicate the company’s plans throughout the organization

  • C. 

    To control income and expenditure in a given period

  • D. 

    To ensure that the company expends its operation.

• 11. 

  Which of the following operations would normally be carried out first when preparing a master budget ?

  • A. 

    Calculating overhead absorption rates.

  • B. 

    Determining the budget period

  • C. 

    Identifying the principal budget factor.

  • D. 

    Preparing a forecast profit and loss account.

• 12. 

  The question of raw material in the purchases budget may be higher than the quantity of raw material in the production budget because:

  • A. 

    Stock level are being reduced

  • B. 

    Raw material prices are falling

  • C. 

    The company obtains discount for bulk purchases

  • D. 

    Units sold will be higher than units sold.

• 13. 

  What type of budget is designed to take into account forecast changes in costs, prices, etc.?

  • A. 

    Rolling budget

  • B. 

    Functional budget

  • C. 

    Flexible budget

  • D. 

    Master budget

• 14. 

  A quantitative expression of management objectives is a(n)

  • A. 

    Organizational chart

  • B. 

    Management chart

  • C. 

    Budget

  • D. 

    Procedural chart

• 15. 

  Operations budget normally cover a period of

  • A. 

    One year or less

  • B. 

    One to two years

  • C. 

    One to five years

  • D. 

    One to ten years

• 16. 

  A budget in which a responsibility centre manager must justify each planned activity and its estimated total cost is called a

  • A. 

    Conventional budget

  • B. 

    Master budget

  • C. 

    Programme planning and budget system

  • D. 

    Zero-based budget

• 17. 

  A budgeting process wherein each and every line of master budget is specified by upper level management is called a(n)

  • A. 

    Authoritative budget

  • B. 

    Participative budget

  • C. 

    Master budget

  • D. 

    Organization budget

• 18. 

  A budgeting process wherein middle and lower level managers plan either in general or specific terms what they believe to be realistic expectation of what their performance should be is called a(n)

  • A. 

    Authoritative budget

  • B. 

    Participative budget

  • C. 

    Master budget

  • D. 

    Organization budget.

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