G11 AS Level Business: Ch 32 - Budgets

What is a budget in business?

• A record of past sales
• A financial plan for the future
• A marketing strategy
• A type of cost

Answer explanation

A budget sets targets for future performance.

What is the main purpose of a budget?

• Increase profit automatically
• Plan and control business activities
• Reduce employees
• Increase prices

Answer explanation

Budgets help plan, monitor, and control performance.

Which of the following is NOT a benefit of budgeting?

• Planning ahead
• Resource allocation
• Guaranteed profit
• Performance measurement

Answer explanation

Budgets do not guarantee success.

Budgets are usually prepared for what time period?

• 1 day
• 1 week
• 1 year
• 10 years

Answer explanation

Most budgets are set annually.

What does budgeting help allocate?

• Customers
• Resources
• Competitors
• Products

Answer explanation

Budgets ensure resources are used efficiently.

What is a cost centre?

• Area generating profit
• Area incurring costs
• Marketing department
• Sales team

Answer explanation

Cost centres focus on controlling costs.

What is a profit centre?

• Area generating revenue and profit
• Area only managing costs
• HR department
• Warehouse

Answer explanation

Profit centres are responsible for revenue and profit.

What is incremental budgeting based on?

• Zero spending
• Last year’s budget
• Competitor budgets
• Random estimates

Answer explanation

It adjusts previous budgets slightly.

What is a limitation of incremental budgeting?

• Too complex
• Ignores past data
• May continue inefficiency
• Too flexible

Answer explanation

It may carry forward unnecessary costs.

What is zero budgeting?

• Budget based on profit
• Budget starts from zero
• Budget based on last year
• Budget with no limits

Answer explanation

Every cost must be justified from scratch.