Budgeting and Forecasting

Question 1

What are the four perspectives of Kaplan & Norton’s balanced scorecard?

Answer 1

1. Financial,
2. Customer,
3. Operations (Internal Processes), and
4. People (Learning & Growth)

Question 2

Only what percentage of organizations successfully execute their strategy, according to Kaplan and Norton?

Answer 2

10%

Question 3

Name the four main budgeting goals related to planning, coordination, communication, and control.

Answer 3

1. Aid planning of operations,
2. Coordinate activities,
3. Communicate plans, and
4. Control/evaluate performance

Question 4

Which type of budget links strategies to objectives and represents the tactical implementation of the business plan?

Answer 4

The master budget

Question 5

What three major categories make up a master budget’s financial statements?

Answer 5

1. Budgeted income statement,
2. Budgeted balance sheet, and
3. Budgeted cash flow statement.

Question 6

What are the three primary types of budgets included in a robust budgeting framework?

Answer 6

1. Operating budgets,
2. Capital expenditure budgets, and
3. Cash budgets.

Question 7

What is incremental budgeting?

Answer 7

A method that takes last year’s actual figures and adds or subtracts a percentage to create this year’s budget

Question 8

What is a key drawback of incremental budgeting related to inefficiency?

Answer 8

It is likely to perpetuate inefficiencies and encourage budgetary slack.

Question 9

In output/input (activity‑based) budgeting, what drives the determination of input costs?

Answer 9

The activities required to achieve business objectives (outputs).

Question 10

What question does value‑proposition budgeting ask about each budget item?

Answer 10

Does this cost create value that outweighs its price for customers, staff, or stakeholders?

Question 11

Zero‑based budgeting starts from what assumption about departmental budgets?

Answer 11

That all department budgets are zero and every cost must be justified from scratch

Question 12

What is one major limitation of zero‑based budgeting?

Answer 12

It is extremely time‑consuming and best used only occasionally, mainly for discretionary costs

Question 13

According to the ‘Beyond Budgeting’ philosophy, what replaces detailed rules in governance?

Answer 13

Shared values and sound judgment

Question 14

Which quantitative forecasting technique uses historical data to smooth short‑term fluctuations and highlight trends?

Answer 14

Moving averages

Question 15

What Excel add‑in allows you to perform multiple linear regression for forecasting?

Answer 15

The Analysis ToolPak

Question 16

In cost behaviour analysis, what type of cost changes in direct proportion to output volume?

Answer 16

Variable cost

Question 17

What does the breakeven point represent?

Answer 17

The sales level where total revenue equals total costs, resulting in zero profit

Question 18

What two components make up contribution margin?

Answer 18

Sales revenue minus variable costs

Question 19

What is variance analysis?

Answer 19

The process of examining differences between actual and budgeted figures to understand performance

Question 20

A favorable materials price variance suggests what about purchase prices?

Answer 20

Actual price paid was lower than the budgeted price per unit of material

Question 21

What dashboard mistake involves showing too much fine detail or precision?

Answer 21

Displaying excessive detail or precision

Question 22

Which Excel feature can dynamically summarize large datasets for budget reports?

Answer 22

Pivot tables

Question 23

What is one advantage of using dedicated budgeting software over linked Excel spreadsheets?

Answer 23

Two‑way integration with the general ledger for automatic data accumulation

Question 24

Name two common causes of an unfavorable labor hours variance.

Answer 24

Poor supervision and machine breakdowns

Question 25

What principle of 'Beyond Budgeting' advocates for rewards?

Answer 25

Base rewards on relative performance rather than meeting fixed targets

Question 26

In moving averages, increasing the period (e.g., from 3‑month to 5‑month) will have what effect on volatility?

Answer 26

It smooths the data more, reducing volatility in the forecast line

Question 27

In variance terminology, what do the letters 'F' and 'U' stand for?

Answer 27

Favorable and Unfavorable

Question 28

What budgeting approach categorizes costs into four types to better understand expenses?

Answer 28

Incremental budgeting categorizes expenses into variable, fixed, semi‑variable, and stepped‑fixed costs

Question 29

List the four common approaches to developing a budget highlighted in the course.

Answer 29

Incremental budgeting, Activity‑based budgeting, Value‑proposition budgeting, and Zero‑based budgeting

Question 30

Which part of the balanced scorecard perspectives focuses on employee skills and capabilities?

Answer 30

People (Learning and Growth) perspective

Question 31

What Excel tools are recommended for solver‑type optimization tasks in budgeting?

Answer 31

Solver and Goal Seek

Question 32

Under output/input budgeting, what should not drive planning?

Answer 32

Available resources should not dictate targets; required activities should

Question 33

What is the purpose of a variance dashboard?

Answer 33

To convey a lot of performance information quickly on a single screen, using visuals and minimal tables

Question 34

Which two factors determine whether earnings are volatile under different cost structures?

Answer 34

The proportion of fixed versus variable costs

Question 35

What is a semi‑variable cost?

Answer 35

A cost containing both fixed and variable components (also called mixed cost)

Question 36

Name one common cause of budget 'gaming.'

Answer 36

Managers inflating forecasts to create slack they can later beat

Question 37

In the budget process timeline, how many months before the fiscal year do large companies typically begin budgeting?

Answer 37

Four to six months

Question 38

What is the margin of safety formula?

Answer 38

(Actual sales – Breakeven sales) / Actual sales × 100%

Question 39

Which cost control matrix axis represents potential savings if a cost is reduced?

Answer 39

Cost significance (high/medium/low)

Question 40

What is a stepped fixed cost?

Answer 40

A cost that remains fixed within a range of output then jumps to a new fixed level once capacity is exceeded

Question 41

What behavioural factor increases budget acceptance and motivation according to participative budgeting studies?

Answer 41

Manager involvement in setting their own targets, especially when job difficulty and uncertainty are high

Question 42

What is the first step before preparing operating budgets, according to the course?

Answer 42

Establish budget centers and create a clearly defined budget organization chart

Question 43

What is the biggest criticism of traditional budgets in terms of strategy focus?

Answer 43

They are rarely strategically focused and can become barriers to responsiveness

Question 44

Name two psychological aspects that influence how managers react to budget targets.

Answer 44

Target difficulty and controllability of results

Question 45

Which quantitative method compares more than one independent variable with a dependent variable?

Answer 45

Multiple linear regression

Question 46

In variance analysis, which variance isolates the effect of selling price changes?

Answer 46

Sales price variance

Question 47

Under 'Beyond Budgeting', how should planning be carried out?

Answer 47

As a continuous and inclusive process, not a top‑down annual event

Question 48

What is the contribution margin ratio formula?

Answer 48

Contribution margin divided by sales revenue

Question 49

Why might organizations use a cost control matrix?

Answer 49

To prioritize cost management efforts based on cost significance and control potential

Question 50

What dedicated budgeting tool feature allows drill‑down and roll‑up capabilities?

Answer 50

Hierarchical aggregation that lets users explore details and summaries in reports