How often Budgeting is asked

Where it was asked

What costs marks here

The questions

1. Oct/Nov 2015, Q4.62 marks · multiple choice

   For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Identify which of the following statements is NOT true of a fixed budget.

2. Oct/Nov 2014, Q1.82.5 marks · multiple choice

   Question 1 consists of eight multiple-choice items (here numbered 1.1–1.8), each apparently worth 2.5 marks so that the eight items together make up the 20 marks allotted to this question, to be completed within 24 minutes. The items are based on several unrelated costing scenarios drawn from divisions of Blue Sky Industries Limited, a large diversified listed company. The High Volt Division manufactures large, heavy-duty transformers mainly supplied to local councils. Based on past experience, the division's capacity has never exceeded 10 units per month, and September 2014 was the first month in which a performance bonus scheme was introduced. The original budget for September 2014 for the High Volt Division was as follows: sales of 10 units at a price of R485 000 per unit, giving total sales of R4 850 000; cost of production comprising material of 10 units at R125 000 per unit (total R1 250 000), labour of 700 units at R950 per unit (total R665 000), and variable overheads of 10 units at R110 140 per unit (total R1 101 400); giving a gross profit of R1 833 600; less expenses being fixed costs (including management and administration) of R650 800, sales commission of 10% of sales amounting to R485 000, and fixed head office charges of R200 000; resulting in a budgeted net profit of R497 800. In flexing this budget, the following must be taken into account: (1) 11 units were actually manufactured and sold, with the selling price unchanged from the original budget; (2) although 70 units of labour were used per transformer produced, management had introduced an incentive policy under which a production bonus is earned for every unit manufactured in excess of 10 transformers, the bonus being equal to 10% of the labour cost for 70 units; (3) the fixed cost remained unchanged; and (4) head office charges remained the same. Flex the budget and determine what the new budgeted net profit is.

3. Oct/Nov 2013, Q1.82 marks · multiple choice

   Question 1 is a multiple-choice section made up of ten short questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you consider correct. Using the same Phala (Pty) Ltd budgeted and actual data described for question 1.7 (budgeted figures at 8 000 and 12 000 units, and actual figures at 10 500 units, for sales, variable manufacturing costs and semi-variable selling and administrative costs), determine what contribution amount the flexible (flexed) budget will show: A. R4 546 500; B. R1 835 750; C. R3 731 000; D. R2 649 250.

4. May/Jun 2013, Q1.92 marks · multiple choice

   Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. You have been appointed as a trainee management accountant at one of the investment banks in Sandton. The head of finance has asked you to prepare a document on budgeting, listing its advantages and disadvantages. You are considering the following statements: (i) budget variances can expose weak points in an organisation; (ii) forecasts are always 100% accurate; (iii) budgets do not help with cost control; and (iv) budgets serve as a roadmap in terms of whether the organisation is achieving its goals. Which combination of these statements is true?

5. May/Jun 2013, Q1.102 marks · multiple choice

   Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. While preparing for your MAC2601 exam, you overhear fellow students discussing flexible (flexed) budgets. They make the following statements: (i) a flexible budget is the approved plan of action for achieving a predetermined goal; (ii) a flexible budget is the budget that calculates budgeted income and budgeted costs according to actual production volume; (iii) preparing a flexible budget requires calculating the fixed cost per unit based on actual production volume; and (iv) a flexible budget restates the position if a variation from the expected sales and production volume occurs, on which the fixed budget was originally based. Which combination of these statements is true?