Effective Budgeting & Cost Control

What is the primary purpose of strategic budgeting?

• To create a short-term financial plan

• To track daily expenses

• To increase revenue and profit

• To align financial resources with long-term organizational goals

What is the key benefit of zero-based budgeting?

• It simplifies financial planning by using last year’s budget

• It ensures every expense is justified from scratch

• It focuses only on cost-cutting measures

• It applies only to non-profit organizations

Which of the following is a common challenge in budget forecasting?

• Predicting future market conditions and revenue accurately

• Reducing unnecessary expenses

• Setting clear financial goals

• Aligning budgets with business strategy

What is the primary objective of cost control in strategic planning?

• To increase expenses to boost revenue

• To ensure costs remain within budget while maintaining efficiency

• To cut costs at all levels without considering performance impact

• To focus only on reducing fixed costs

What is a key difference between fixed and variable costs?

• Fixed costs change with production levels, while variable costs remain constant

• Variable costs change with production levels, while fixed costs remain constant

• Fixed costs are directly tied to revenue, while variable costs are not

• Variable costs only apply to service-based businesses

What is the main advantage of activity-based budgeting?

• It bases expenses on past financial performance

• It links costs directly to business activities and resource usage

• It reduces financial reporting requirements

• It eliminates the need for strategic planning

What is the primary purpose of variance analysis in budgeting?

• To compare actual financial performance with budgeted figures

• To create new revenue streams

• To develop long-term strategic goals

• To eliminate all variances from financial statements

Which of the following is NOT a commonly used method in capital budgeting decisions?

• Net Present Value (NPV)

• Internal Rate of Return (IRR)

• Gross Profit Margin

• Payback Period

What is the role of key performance indicators (KPIs) in budget management?

• They replace the need for financial forecasting

• They help measure financial performance against strategic objectives

• They track employee attendance

• They focus solely on revenue generation

Select the main objectives of responsibility reporting from the list below

• Allowing certain degree of authority over resources under unit head

• Implementing effective performance measurement

• Ignoring budget variances unless they are extreme

• Reflects control over departmental inputs to produce planned outputs