Senior Secondary (HKDSE) · Business, Accounting and Financial Studies

Budgeting : Practice Questions

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

10 questions22 marksFree, no account

Question 1

1 mark

Which of the following is a primary limitation of using budgetary control in a business?

Question 2

1 mark

In budgetary control, which of the following scenarios is most likely to cause a favourable direct labour rate variance but an unfavourable direct labour efficiency variance?

Question 3

1 mark

A manufacturing firm uses a standard costing system for budgetary control. Last month, it reported a significant favourable direct material price variance but a significant unfavourable direct material usage variance. Which of the following is the most plausible explanation?

Question 4

1 mark

In budgetary control, which of the following is an external cause of a budget variance?

Question 5

1 mark

A manager found that the direct material usage variance for the last month was significantly unfavourable. Which of the following identifies a possible cause and a corresponding remedial action?

Question 6

3 marks

Explain how the implementation of budgetary control facilitates the management principle of management by exception and state one specific benefit this provides to senior managers in a large corporation.

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Question 7

5 marks

A rapidly expanding technology start-up operates in a highly volatile market characterised by frequent technological disruptions and unpredictable customer demand. Evaluate the significant challenges this company would face in implementing and maintaining effective budgetary control, and suggest one advanced strategic adaptation for its budgeting process to overcome these challenges.

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Question 8

3 marks

Identify one usefulness and one limitation of budgetary control for a business.

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Question 9

2 marks

Explain two primary purposes of preparing a budget for a business.

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Question 10

4 marks

ABC Manufacturing Ltd. implements budgetary control to manage its operations. Recently, the company observed some deviations from its planned budget figures.

a) Identify and briefly explain two usefulness of implementing budgetary control for a business like ABC Manufacturing Ltd.

b) Outline one potential limitation of budgetary control.

c) Without performing calculations, suggest one possible cause for an unfavourable direct material cost variance that ABC Manufacturing Ltd. might face.

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