ACCA Applied Knowledge (BT, MA, FA) · Management Accounting (MA)

Budgeting

19 practice questions, each with the answer and an explanation.

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Random questions from this topic, one at a time. You see the answer and the explanation straight after each one.

All 19 questions

  1. Which of the following best describes the principal budget factor?
  2. A company expects to sell 12,000 units next period. Opening finished goods inventory is 1,000 units and the closing inventory is planned at 1,500 units. How many units must be produced?
  3. The production budget is 12,500 units. Each unit needs 2 kg of material. Opening material inventory is 3,000 kg and the closing inventory is to be 4,000 kg. How many kg of material must be purchased?
  4. A company's monthly sales are collected as follows: 60% in the month of sale (with a 2% discount for prompt payment), 38% in the following month and 2% irrecoverable. Sales in May were £50,000 and in…
  5. A department's budget for 5,000 units is: variable costs £15,000 and fixed costs £40,000. Actual output was 6,200 units. What is the flexed budget cost allowance for 6,200 units?
  6. What is the main reason for using a flexible budget to assess performance at the end of a period?
  7. A company prepares its budget every month by adding a new month and dropping the month just completed, so that a twelve-month budget is always available. What is this called?
  8. Which of the following is a major disadvantage of incremental budgeting?
  9. Managers who are given the chance to set their own budgets deliberately overstate the costs and understate the sales. What is this behaviour called?
  10. Which of the following describes a participative approach to budget setting?
  11. A product sells at £30 and has a variable cost of £18, with fixed costs of £48,000. If the selling price is reduced to £27 and the variable cost stays at £18, how many units must be sold to break even…
  12. A company makes a component for £14 variable cost per unit plus £4 per unit of absorbed fixed overhead that would continue whether or not it makes the component. A supplier offers to sell the componen…
  13. What is a master budget?
  14. A product sells for £120 and its direct material cost is £45. It needs 3 hours on the bottleneck. Total factory costs are £360,000 a year, and the bottleneck has 12,000 hours available. What is the th…
  15. A company sells two products in a fixed mix of 3 units of A to 1 unit of B. Contribution is £8 per unit of A and £20 per unit of B. Fixed costs are £88,000. How many units of B are sold at break-even?
  16. A company needs 8,000 good units. Past experience shows that 5% of all units started in production are defective and scrapped. How many units must be started in production (rounded up to the next whol…
  17. At the start of March a company has cash of £5,000. Sales are £50,000 in February and £60,000 in March; 40% is received in the month of sale and 60% in the following month. Purchases of £28,000 in Feb…
  18. A budget for 1,000 units shows a selling price of £50, variable cost of £30 per unit and fixed costs of £12,000. Actual results for 1,100 units were: sales revenue £52,800, variable costs £32,500 and…
  19. Fixed costs are £48,000 up to 5,000 units and £60,000 if output is higher. The contribution is £12 per unit. How many units must be sold to earn a profit of £40,000?

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