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Edexcel A Level Business - Exam Questions on Budgets 2
Edexcel A Level Business - Exam Questions on Budgets 2 With Answers
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BudgetsIdentify whether each of the following statements are true or false. Justify your answer.
Statement True/False
A negative variance is always adverse. False
Justification:
A positive or a negative variance may be favourable, or it may be adverse.
If actual revenue is higher than budget then there is a favourable variance. True
Justification:
If revenue is higher than budgeted, then it would be favourable for the business as it would
be getting more capital than expected
There will always be a variance between actual and budget. True
Justification:
Yes, because it is the difference between budgeted and the actual amounts and businesses
will always have financial situations
If all other variances are adverse the profit variance must also be adverse. True
Justification:
If all the variances are adverse, then the profit variance depending on the Actual/Budgeted
amounts, should be the same, adverse
An adverse variance will result in negative net cash flow. False
Justification:
Could depend on the figures and financial status
1. Use the information provided to complete the table below:
All sales were paid in cash at the time of purchase. Monthly sales were £35 000
Expenditure was 40% of sales paid in the same month
There was a £2 000 favourable variance on sales
In month 1 the closing balance was (£3 000)
Budget Actual Variance
Revenue Favourable
Expenditure
Profit
Month 1 Month 2 Month 3
Cash in £35,000 £35,000 £35,000
Cash out £21,000 £21,000 £21,000
Net cash flow £14,000 £14,000 £14,000
Opening balance 0 £3,000 £17,000
Closing balance £3,000 £17,000 £31,000
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