E5 Pricing, budgeting and control

Demand is P = 80 - 0.01Q and marginal cost is $20. What is the profit-maximising quantity?

• 1 4,000
• 2 6,000
• 3 3,000
• 4 2,000

With the same demand equation (P = 80 - 0.01Q) and marginal cost of $20, what is the profit-maximising price?

• 1 $20
• 2 $60
• 3 $50
• 4 $80

What is the main feature of green budgeting?

• 1 It sets only financial targets
• 2 It builds sustainability goals and targets into the budget
• 3 It ignores the environment
• 4 It removes all costs

Which budgeting approach is best suited to an uncertain and volatile environment?

• 1 No budget
• 2 Fixed annual budgeting
• 3 Rolling budgeting
• 4 Incremental budgeting only

What is the problem with setting a budget target that is too difficult?

• 1 Managers may give up, so motivation falls
• 2 Managers always work harder
• 3 It has no effect
• 4 Costs fall automatically

Which principle says that managers should be judged only on what they can influence?

• 1 Materiality
• 2 Controllability
• 3 Prudence
• 4 Consistency

What is a limitation of variance analysis?

• 1 It uses future data
• 2 It cannot be calculated
• 3 It ignores non-financial and external factors
• 4 It is too simple

What is the purpose of a planning variance?

• 1 To increase sales
• 2 To reduce costs
• 3 To separate the effect of changes in the standard that are outside the manager's control
• 4 To measure efficiency only