Practice Test GeeksAAT Level 4 Practice Test
← All AAT L4 Flashcard Decks

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

  1. A company has budgeted sales of 12,000 units for Q1. Opening inventory is 2,000 units and the desired closing inventory is 3,000 units. How many units must be produced?

    Answer: 13,000

    Production budget = Budgeted sales + Desired closing inventory - Opening inventory = 12,000 + 3,000 - 2,000 = 13,000 units.

  2. Which budgeting approach requires every item of expenditure to be justified from scratch each period?

    Answer: Zero-based budgeting

    Zero-based budgeting starts from a zero base each period, requiring all expenditure to be justified as if budgeting for the first time. Unlike incremental budgeting, it does not simply adjust the previous year's budget.

  3. A flexed budget adjusts the original budget for:

    Answer: The actual level of activity achieved

    A flexed budget recalculates budgeted revenues and variable costs based on the actual volume of activity achieved, while keeping fixed costs unchanged. This provides a like-for-like comparison with actual results.

  4. A company budgets fixed overheads of £180,000 and variable overheads of £6 per unit. Budgeted output is 20,000 units but actual output is 22,000 units. What is the flexed budget for total overheads?

    Answer: £312,000

    Flexed budget total overheads = Fixed overheads + (Variable overhead per unit x Actual output) = £180,000 + (£6 x 22,000) = £180,000 + £132,000 = £312,000.

  5. What is the principal budget factor?

    Answer: The factor that limits the organisation's activities in a given period

    The principal budget factor is the factor that constrains the organisation's output — commonly sales demand, but it could be labour, materials, or machine capacity. All other budgets are prepared based on this constraint.

  6. Participative (bottom-up) budgeting is most likely to result in:

    Answer: Greater staff motivation and ownership of targets

    Participative budgeting involves managers at all levels in setting their own budgets. This increases buy-in, motivation, and ownership because staff have contributed to the targets they are expected to meet.