Business Revision Quiz 2 - Budgets, Business Costs

Which of these actions might help correct an adverse overheads variance

• Increase bonus payments

• Offer promotional discounts

• Cut supplier payments for raw materials

• Reduce Head Office staff numbers

Which one of these would result in a favourable budget variance

• Actual gross profit 13k; Budget gross profit 16k

• Actual sales 40k; Budget sales 42k

• Budget cost 18k; Actual cost 16k

• Budget revenue 125k; Actual revenue 115k

A potential downside of budgeting is that budget-holders

• Might spend their budget rather than make savings

• Will feel less motivated

• Might take short-term decisions

• Will always spend more than their allowance

Which one of the following is an adverse variance

• Marketing expenditure lower than budget

• Sales revenue lower than budget

• Raw materials cost lower than budget

• Gross profit margin higher than budget

Which one of these is most likely to result in an adverse overheads variance?

• Actual gross profit margin is 5% less than budget

• Capital spending falls short of budget

• Customers respond to a price cut

• Management get a surprise pay increase

A common reason why many small businesses don't use budgets is that:

• Budgeting can be time-consuming

• SMEs don't record variances

• Trading is too predictable

• The law only requires them for large firms

Which of these statements about budgeting is incorrect?

• A budget is a financial plan

• Budgets provide direction and coordination

• Budgets can help motivate staff

• A forecast looks forward whereas a budget looks back

The sales budget assumed 200 units would be sold for £15 each; actual sales were £4200. What was the variance?

• £3,000 favourable

• £1,200 favourable

• £1200 adverse

• £3000 adverse

Which of the following is a possible explanation for a favourable sales variance

• Lower than expected gross profit margin

• Lower than expected overtime costs

• Lower than expected sales volume

• Higher than expected selling prices

What does total cost mean?

• Fixed+variable costs

• Total profit less costs

• Set-up costs less revenues

• All cash outflows