PM D Budgeting and control

Written by Mahnoor Sheikh (ACCA)

ACCA · Performance Management · 14 questions

Name: ____________________ Date: ____________

Which budgeting approach requires every activity to be justified from a zero base?
- A Rolling budgeting
- B Incremental budgeting
- C Fixed budgeting
- D Zero-based budgeting
A budget that adds a new period as each period ends is called:
- A An incremental budget
- B A rolling budget
- C A flexed budget
- D A zero-based budget
Which is an advantage of participative budgeting?
- A It is faster than imposed budgets
- B It needs no negotiation
- C It improves commitment and uses managers' knowledge
- D It removes budget slack
The first unit takes 100 hours and there is an 85 percent learning curve (cumulative average). What is the total time for the first 4 units?
- A 289 hours
- B 400 hours
- C 255 hours
- D 340 hours
The standard mix is 60 percent X at $2 and 40 percent Y at $3. 1,000 kg were used: 650 kg of X and 350 kg of Y. What is the mix variance?
- A $150 favourable
- B $50 adverse
- C $50 favourable
- D $100 adverse
A standard yield of 90 percent. 1,000 kg of input produced 855 kg of output. The standard average input cost is $2.40 a kg. What is the yield variance?
- A $120 adverse
- B $120 favourable
- C $2,052 adverse
- D $50 adverse
Mix and yield variances add up to which variance?
- A The labour rate variance
- B The sales price variance
- C The material usage variance
- D The material price variance
The original standard material price is $5 a kg. A market change makes a revised standard of $5.50 and the actual price is $5.40 for 1,000 kg. What is the planning variance?
- A $500 favourable
- B $400 adverse
- C $500 adverse
- D $100 favourable
The original standard material price is $5 a kg. A market change makes a revised standard of $5.50 and the actual price is $5.40 for 1,000 kg. What is the operational price variance?
- A $100 favourable
- B $100 adverse
- C $500 adverse
- D $400 adverse
A planning variance shows:
- A The manager's efficiency
- B The effect of changes outside the manager's control
- C The effect of the sales mix
- D The effect of waste
The sales mix variance shows the effect of:
- A Changes in selling prices
- B Selling more units in total than the budget
- C Selling a different proportion of products from the budget
- D Changes in material prices
A manager buys cheaper material and the usage variance becomes adverse. This shows that variances are:
- A Always favourable
- B Always independent
- C Interrelated
- D Not useful
What is the 'beyond budgeting' model?
- A It replaces fixed annual budgets with flexible targets and continuous planning
- B It adds more detail to the annual budget
- C It uses only incremental budgets
- D It removes all targets
Which technique can be used to forecast costs by finding the line that best fits historical data?
- A Regression analysis
- B Throughput accounting
- C Target costing
- D Zero-based budgeting

Answer key

1. D, 2. B, 3. C, 4. A, 5. C, 6. A, 7. C, 8. C, 9. A, 10. B, 11. C, 12. C, 13. A, 14. A

Incremental budgets build on last year's figures.
It keeps the budget current.
Participation can improve motivation, but it takes time.
The cumulative average for 4 units is 100 x 0.85 x 0.85 = 72.25 hours, so the total is 289 hours.
At the standard mix, 600 kg of X and 400 kg of Y would be used. (600 - 650) x 2 + (400 - 350) x 3 = -100 + 150 = 50 favourable.
The standard input for 855 kg is 950 kg. (950 - 1,000) x $2.40 = $120 adverse.
Together they explain the total usage variance.
(5.00 - 5.50) x 1,000 = $500 adverse.
(5.50 - 5.40) x 1,000 = $100 favourable.
Operational variances show the manager's performance.
The quantity variance deals with the total number of units.
A favourable price variance can cause an adverse usage variance.
It aims to make the organisation more adaptive.
Regression finds the line y = a + bx.