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Internal operations of a large business · Part 5 of 6
9 exam-style questions with model answers, plus 15 quick multi-choice questions — every question on this part of the standard, grouped by the 3 pages of notes they come from.
Write a full answer before you reveal the model one. That comparison is where the learning happens.
Explain what a budget is and why a large business prepares one.
A large business is considering investing in new technology. Fully explain why preparing a budget will aid managers in their decision-making.
A large business sets departmental budgets each year by taking last year's figures and adding an inflation adjustment. A manager proposes instead that each department justify its full budget from zero every year.
Referring to cost control and management time, justify, with TWO reasons, which approach would be more appropriate.
Explain why using variance analysis could be an advantage to a business.
When investing in new technology, fully explain what might cause a business to experience an unfavourable variance, and how the business could correct it.
A business reports an unfavourable raw materials variance of $28,000 and a favourable wages variance of $4,000 for the same month. A manager proposes cutting the materials budget for next month to bring spending back into line.
Referring to cost control and product quality, justify, with TWO reasons, whether this is an appropriate response.
Explain why preparing monthly revenue and cost reports is an advantage to a business.
Fully explain why monthly revenue and cost reports are particularly useful to a business with seasonal demand, and how this could positively impact the business.
A large business currently produces detailed monthly revenue and cost reports for every department. A manager proposes moving to weekly reporting to improve responsiveness.
Referring to decision quality and management time, justify, with TWO reasons, whether the business should make this change.