Cambridge International AS Level · Business (9609)

Budgets: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Budgets.

10 questions26 marksFree, no account

Question 1

1 mark

Which of the following describes the most likely impact of delegated budgeting on a firm's workforce?

Question 2

1 mark

A company reports a favourable material price variance but an adverse material usage variance. Which scenario most likely explains these results?

Question 3

1 mark

A business is moving towards a flexible budgeting system. In the context of performance measurement, why is a flexible budget considered superior to a static (fixed) budget?

Question 4

1 mark

A government department is required to justify every item of expenditure from a base of zero for the upcoming fiscal year, rather than using the previous year's figures as a starting point. Which budgeting method is being described and what is a primary disadvantage of this method?

Question 5

1 mark

A retail chain is considering moving from incremental budgeting to zero budgeting. Which of the following best describes a primary advantage of zero budgeting for this business?

Question 6

2 marks

Explain one benefit to a business of using budgets for the allocation of resources.

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Question 7

4 marks

Explain how zero budgeting differs from incremental budgeting in terms of how a manager justifies the financial resources requested for a new department.

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Question 8

6 marks

A production manager reports an adverse labor efficiency variance of \( \$4,000 \) despite a favourable material price variance. Analyze how these two variances might be linked in a manufacturing environment.

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Question 9

4 marks

A manufacturing company is reviewing its financial performance for the last quarter. The company uses budgets for measuring performance and allocating resources.

(a) Define the term favourable variance. (2 points)
(b) Explain one way in which a business might use budgets for monitoring and controlling its activities. (2 points)

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Question 10

5 marks

A local retail chain is considering changing its budgeting approach. Currently, it uses incremental budgets, but the finance director has suggested moving to zero budgeting to improve efficiency.

(a) Distinguish between incremental budgeting and zero budgeting. (2 points)
(b) Discuss two benefits to a business of using flexible budgets instead of static (fixed) budgets when facing a volatile economic environment. (3 points)

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