Budgeting

1. Which is the mostly likely purpose of budgeting?

• Planning and control of an organization' s income and expenditure

• Preparation of a five-year business plan

• Company valuation

• Assess the non-financial performance of an organization

Which of the following budgets would not form part of the master budget?

• Cash budget

• Statement of profit or loss

• Sales budget

• Statement of financial position

A crockery company makes china cups and saucers. How much clay would they need to buy if:
- a cup uses 100g of clay
- a saucer uses 150g of clay
- it plans to make 450,000 cups and 280,000 saucers
- there is no opening inventory
- it would like to have closing inventories of 4,000kg of clay?

• 83,000kg

• 99,500kg

• 87,000kg

• 91,000kg

. Calculate the production budget from the following data: sales 89,350 units; opening inventory 23,864 units; closing inventory 33,156 units.

• 80,058 units

• 146,370 units

• 32,330 units

• 98,642 units

. A business plans to make 15,000 coats per annum, each taking the 1.5 direct labour hours. If the direct labour rate is $8 per hour and a pay rise of 15% is awarded halfway through the year, what is the total annual direct labour budget?

• $120,000

• $193,500

• $180,000

• $207,000

What is meant by an incremental budget?

• A budget prepared from first principles

• The variable elements of a budget, excluding fixed costs

• A budget that is based on the previous year, adjusted for known changes

• A budget that breaks even

Which of the following statements can be considered to be an advantage of a bottom-up budget?

• Uses the knowledge of all staff to build a fair budget

• The cheapest method of producing a budget

• Reduces the level of budget negotiation between staff

• Prevents slack being built into budgets

A firm has produced the following budget for an activity level of 200,000 units:

What would be the total cost for a level of activity of 225,000 units?

• €133,875

• €148,500

• €125,889

• €138,875