AMA Q22 - Chapter 3

Question 1

The four areas of budgetary control?

Answer 1

1. Co-ordinating
2. Planning
3. Cost Control
4. Authorising

Question 2

Role of a budget accountant

Answer 2

1. Prepares budget
2. Prepares management accounts (reasons for variances)
3. Communicating results to senior management

key link between committee and budget holders

Question 3

What might a budget manual include?

Answer 3

• Names of budget holders
• Managers responsible for specific areas
• Time guidelines
• Format of budget
• Processes of preparing

Question 4

four key areas of consideration when preparing a budget

Answer 4

• who sets it
• how achievable is it?
• Goal congruence
• performance-related pay

Question 5

Budgetary slack

Answer 5

setting a budget too high in the hope that the manager responsible will never have to overspend and make their performance seem better

Question 6

What methods are there for forecasting sales?

Answer 6

• knowledge of managers within
• market research and sampling
• Time series analysis
• Product life cycle analysis
• Index numbers

Question 7

Budget committee

Answer 7

senior executives responsible for overseeing the preparation of budgets. Contains a budget accountant

Question 8

Budget holder

Answer 8

A manager within a business who is responsible for at least one aspect of a budget

Question 9

Master budget

Answer 9

essentially an imagined P&L

Question 10

Incremental Budgeting

Answer 10

Previous budget is adjusted for changes in prices and activity levels

Question 11

Zero-Based Budgeting

Answer 11

A decision checklist is gone through for each item of expenditure within a budget. If the item, is deemed necessary, it is added to the budget.

Question 12

Uses of ZBB

Answer 12

• Great for project businesses
• Great for ensuring efficiency
• Great for certain ad-hoc spends like marketing, advertising, training, etc.

Question 13

Activity-Based Budgeting

Answer 13

Setting a budget according to the usage of cost drivers within a business. E.g. a cost driver for a restaurant is meals ordered

Question 14

Priority-based budgeting

Answer 14

similar to ABB except that the budget allocations is given based off of priority. Common in public sector

Question 15

Rolling budget

Answer 15

a budget that continually shows a fixed amount of time into the future that shifts with each period. good for showing how anomalies can affect the future

Question 16

Contingency budgets

Answer 16

Used for one-off projects or changes within a business. For instance, moving into a new office building

Question 17

Budgeting Operating Statement

Answer 17

Like a predicted P&L

Question 18

Ways of dealing with uncertainty in budgetting

Answer 18

• Planning models such as sensitivity analysis that allow management to focus on crucial variables
• regular re-forecasting like time series
• Re-budgetting: updating budgets
• Rolling budgets