Management Accounting Budgeting Flashcards
6 cards from real AAT L4 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Management Accounting Budgeting flashcards as text
A company uses a rolling budget covering January to December 2026. At the end of March 2026, what period will the revised rolling budget cover?
Answer: April 2026 to March 2027
A rolling budget always maintains a fixed forward-looking period (typically 12 months). At the end of March 2026, the expired quarter is dropped and a new quarter (January-March 2027) is added, giving April 2026 to March 2027.
The sales budget shows expected sales of £500,000. 60% of sales are on credit. Credit customers pay: 70% in the month of sale, 25% the following month, 5% irrecoverable. What is the budgeted cash receipt from credit sales in the month of sale?
Answer: £210,000
Credit sales = 60% x £500,000 = £300,000. Cash received in the month of sale = 70% x £300,000 = £210,000.
Which of the following is a disadvantage of incremental budgeting?
Answer: It perpetuates past inefficiencies into future budgets
Incremental budgeting takes the previous period's budget as the starting point and adjusts for expected changes. Any inefficiencies or wasteful spending embedded in the prior budget are carried forward without challenge.
A company's budget committee is responsible for:
Answer: Coordinating the budget preparation process and resolving conflicts between departmental budgets
The budget committee coordinates the budget process, sets guidelines, reviews departmental submissions, resolves conflicts between competing budget requests, and approves the final master budget.
A manufacturing company has budgeted production of 5,000 units. Each unit requires 2.5 hours of direct labour at £14 per hour. What is the total labour budget?
Answer: £175,000
Total labour hours = 5,000 x 2.5 = 12,500 hours. Total labour cost = 12,500 x £14 = £175,000.
An adverse sales volume variance combined with a favourable sales price variance most likely indicates that:
Answer: The company sold fewer units at a higher price
An adverse volume variance means fewer units were sold than budgeted. A favourable price variance means the actual selling price exceeded the budgeted price. Together, this suggests higher prices reduced demand below budgeted levels.