Budgeting-A level Business

A potential downside of budgeting is that budget holder:

• Might take short term decisions

• will feel less motivated

• Might spend their budget rather than make savings

• will always spend more than their allowance

Which of these statements about budgeting is correct:

• Budget can help motivate the staff.

• A budget is a financial plan.

• A forecast looks forward whereas budget looks back.

• Budget provides coordination and direction.

The sales budget assumes 200 units would be sold for $15 each; actual sales were $4,200.What was the variance?

• $3000 (adverse)

• $1200 (favourable)

• $1200 (adverse)

• $3000 (favourable)

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

• Trading is too predictable.

• The law only requires them for large firms.

• SME's don't record variances.

• Budgeting can be time consuming.

Which of these actions might help correct an adverse overheads variance?

• Increase bonus payments.

• Reduce Head Office staff numbers.

• offer promotional discounts

• Cut supplier payments for raw materials.

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

• Higher than expected selling prices

• Lower than expected gross profit margins

• Lower than expected overtime costs.

• Lower than expected sales volumes.

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

• Customer respond to price cut.

• Management get a surprise pay increase.

• Capital spending fall short of budget.

• Actual gross profit margin is 5% less than budget.

Which one of these would result in a favourable budget variance?

• Budget cost $18; Actual cost $16

• Budget revenue $125k;Actual revenue $115k

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

• Actual sales $40k; Budget sales $42k

Which one of the following is an adverse variance?

• Marketing expenditure lower than the budget.

• Raw material cost lower than the budget.

• Gross profit margin higher than the budget.

• Sales revenue lower than the budget..