Chap 10: Budgetary systems

Question 1

Câu 1(2 Điểm) : The following statements have been made about flexible budgets:
1. Flexible budgets enable proper comparisons to be made between actual and expected revenues and costs.
2. In every variance reporting system with flexible budgets that compares budgeted and actual profit, there must be a sales volume variance.
Which of the above statements is/are true?

A 1 only
B 2 only
C Neither 1 nor 2
D Both 1 and 2

Answer 1

D
Flexible budgets enable actual results to be compared with expected results for the same volume of activity, such as production and sales. To reconcile and original budgeted profit to actual profit with variances there must be a sales volume variance (measured in terms of either budgeted / standard contribution of profit, depending on the type of costing system used)

Question 2

Câu 2(2 Điểm) : Are the following statements about zero – based budgeting true/ false?
(1) Employees will focus on eliminating wasteful expenditure

(2) Short – term benefits could be emphasized over long – term benefits

A
TRUE, FALSE
B
TRUE, TRUE
C
FALSE, TRUE
D
FALSE, FALSE

Answer 2

B
Zero-based budgeting begins by looking at the minimum budgeted expenditure, and building a budget from this zero base. This encourages employees to focus on wasteful and unnecessary spending.
However the focus is on short – term savings and may give insufficient consideration to longer – term benefits of current spending.

Question 3

Câu 5(2 Điểm) : For which of the following reasons is zero-based budgeting (ZBB) often considered more suitable for public sector service organisations than for private sector companies?

A
ZBB is more suited to costs where there is little discretionary spending, as in the public sector services.
B
The public sector is better able to afford the high cost of ZBB.
C
ZBB is used in a top-down approach to budgeting, which is more common in the public sector than the private sector. It is easier to put public sector activities into decision packages because they are more easily definable than in the private sector.
D
It is easier to put public sector activities into decision packages because they are more easily definable than in the private sector
Gợi ý:

In an article in Student Accountant on incremental budgeting and zero-based budgeting, the ACCA examining team described two reasons why ZBB is often considered more suitable for public sector service organisations than for private sector companies. One is that ZBB is more suited to costs where there is a lot of discretionary spending, as in the public sector services. The second reason is that activities of public sector organisations are more easily definable and so can usually be put into decision packages. (For example, the activities of a local authority can be grouped into packages for local housing, local education, local refuse collection and waste disposal, and so on.)

Answer 3

C

Gợi ý:

In an article in Student Accountant on incremental budgeting and zero-based budgeting, the ACCA examining team described two reasons why ZBB is often considered more suitable for public sector service organisations than for private sector companies. One is that ZBB is more suited to costs where there is a lot of discretionary spending, as in the public sector services. The second reason is that activities of public sector organisations are more easily definable and so can usually be put into decision packages. (For example, the activities of a local authority can be grouped into packages for local housing, local education, local refuse collection and waste disposal, and so on.)