Preparation of Annual Budget MCQs
What is the primary purpose of preparing an annual budget?
A) To control costs
B) To predict future financial performance
C) To satisfy auditors
D) To prepare financial statements
Answer: B
Who is typically responsible for preparing the annual budget in an organization?
A) Human Resources department
B) Finance department
C) Sales department
D) IT department
Answer: B
Which of the following is NOT a component of an annual budget?
A) Cash flow statement
B) Balance sheet
C) Income statement
D) Statement of retained earnings
Answer: D
The process of comparing actual financial results to the budget is known as:
A) Budget reconciliation
B) Budget analysis
C) Budget evaluation
D) Budget assessment
Answer: B
Which budgeting technique involves creating budgets based on expected sales levels?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: C
A budget that remains fixed irrespective of changes in business activity is known as a:
A) Static budget
B) Dynamic budget
C) Flexible budget
D) Rolling budget
Answer: A
Which budgeting approach starts from scratch each budget cycle, without considering past budgets?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: A
The master budget typically includes all of the following EXCEPT:
A) Sales budget
B) Production budget
C) Marketing budget
D) Cash budget
Answer: C
Which budget focuses on expected cash receipts and cash disbursements during a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: C
Which budgeting method adjusts the budget based on changes in business activity levels?
A) Static budgeting
B) Dynamic budgeting
C) Flexible budgeting
D) Zero-based budgeting
Answer: C
Which budget provides a detailed plan of expected sales revenue for a specific period?
A) Production budget
B) Sales budget
C) Cash budget
D) Capital budget
Answer: B
Which budget estimates the number of units to be produced during a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: B
What is the purpose of a capital budget?
A) To manage day-to-day operational expenses
B) To plan for long-term investments in assets
C) To control variable costs
D) To forecast cash flow fluctuations
Answer: B
Which budgeting approach adjusts the budget periodically based on current conditions and forecasts?
A) Static budgeting
B) Dynamic budgeting
C) Flexible budgeting
D) Rolling budgeting
Answer: D
Which budgeting method starts from the previous period’s budget and adjusts it for changes?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: B
Which budget estimates expenses that vary with production levels, such as raw materials and labor?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: B
A flexible budget is most useful for:
A) Predicting sales revenue accurately
B) Controlling fixed costs
C) Analyzing variances between budgeted and actual results
D) Managing short-term cash flow
Answer: C
Which budget details the expected costs and revenues for specific projects or investments?
A) Sales budget
B) Production budget
C) Cash budget
D) Capital budget
Answer: D
Which budgeting technique requires justifying every expense from scratch each budgeting cycle?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: A
Which budget focuses on anticipated cash inflows and outflows over a period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: C
A flexible budget adjusts for changes in:
A) Fixed costs only
B) Variable costs only
C) Both fixed and variable costs
D) Direct labor costs only
Answer: C
Which budgeting technique allocates resources based on expected activities and their costs?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: C
The process of comparing budgeted amounts to actual results is known as:
A) Budget reconciliation
B) Budget variance analysis
C) Budget revision
D) Budget allocation
Answer: B
Which budget details the expected costs to be incurred for production activities?
A) Sales budget
B) Production budget
C) Cash budget
D) Capital budget
Answer: B
A rolling budget is updated:
A) Quarterly
B) Annually
C) Monthly
D) As needed throughout the year
Answer: D
Which budgeting method assumes no changes in business activity levels from the previous period?
A) Static budgeting
B) Dynamic budgeting
C) Flexible budgeting
D) Zero-based budgeting
Answer: A
Which budget details the projected cash inflows and outflows for a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: C
A flexible budget is useful for:
A) Controlling variable costs
B) Projecting fixed costs accurately
C) Analyzing performance across different activity levels
D) Estimating long-term investments
Answer: C
Which budget details the expected sales revenue for a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Capital budget
Answer: A
A flexible budget adjusts for changes in:
A) Variable costs only
B) Fixed costs only
C) Both fixed and variable costs
D) Direct labor costs only
Answer: C
Which budget estimates the number of units to be produced or sold during a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: B
Which budgeting technique requires justifying every expense from scratch each budgeting cycle?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: A
A rolling budget is updated:
A) Quarterly
B) Annually
C) Monthly
D) As needed throughout the year
Answer: D
Which budgeting method assumes no changes in business activity levels from the previous period?
A) Static budgeting
B) Dynamic budgeting
C) Flexible budgeting
D) Zero-based budgeting
Answer: A
Which budget details the projected cash inflows and outflows for a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: C
A flexible budget is useful for:
A) Controlling variable costs
B) Projecting fixed costs accurately
C) Analyzing performance across different activity levels
D) Estimating long-term investments
Answer: C
Which budget details the expected sales revenue for a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Capital budget
Answer: A
A flexible budget adjusts for changes in:
A) Variable costs only
B) Fixed costs only
C) Both fixed and variable costs
D) Direct labor costs only
Answer: C
Which budget estimates the number of units to be produced or sold during a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: B
Which budgeting technique requires justifying every expense from scratch each budgeting cycle?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: A
A rolling budget is updated:
A) Quarterly
B) Annually
C) Monthly
D) As needed throughout the year
Answer: D
Which budgeting method assumes no changes in business activity levels from the previous period?
A) Static budgeting
B) Dynamic budgeting
C) Flexible budgeting
D) Zero-based budgeting
Answer: A
Which budget details the projected cash inflows and outflows for a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: C
A flexible budget is useful for:
A) Controlling variable costs
B) Projecting fixed costs accurately
C) Analyzing performance across different activity levels
D) Estimating long-term investments
Answer: C
Which budget details the expected sales revenue for a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Capital budget
Answer: A
A flexible budget adjusts for changes in:
A) Variable costs only
B) Fixed costs only
C) Both fixed and variable costs
D) Direct labor costs only
Answer: C
Which budget estimates the number of units to be produced or sold during a specific period?
A) Sales budget
B) Production budget
C) Cash budget
D) Flexible budget
Answer: B
Which budgeting technique requires justifying every expense from scratch each budgeting cycle?
A) Zero-based budgeting
B) Incremental budgeting
C) Activity-based budgeting
D) Flexible budgeting
Answer: A
A rolling budget is updated:
A) Quarterly
B) Annually
C) Monthly
D) As needed throughout the year
Answer: D
Which budgeting method assumes no changes in business activity levels from the previous period?
A) Static budgeting
B) Dynamic budgeting
C) Flexible budgeting
D) Zero-based budgeting
Answer: A