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A snowboard manufacturer is considering investing in technology that will give a good indication of how heavy snowfall will be in the future. The predictions tend to be reasonably accurate.

The current budgeted profit for the year is £2,560,000 but if they invest in this technology and it works, the expected profit will be £2,640,000. The manufacturer is willing to invest a maximum of £40,000 into the venture.

What is the expected profit if the investment is NOT made?

Options:

£2,560,000

£2,640,000

£2,520,000

£2,600,000

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Question 2

Which of the following managers is most likely to be responsible for an favourable labour efficiency variance?

Options:

Production Manager

Purchasing Manager

Human Resources Manager

Marketing Manager

Question 3

A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.

Discuss the benefits of flexible budgeting for planning and control purposes.

Select all the true statements.

Options:

A fixed budget will provide meaningful control information when actual activity differs from budget and variable costs are significant.

If actual sales revenue is compared to a fixed budget it is possible to tell whether a favourable sales variance is due to an increase in units sold or an increase in sales price.

If sales volumes were well above budget, adverse variable cost variances will probably be reported, against the fixed budget, since more variable costs have to be incurred to support the higher level of activity.

Reporting against a fixed budget tells management nothing about the efficiency of operations.

If a flexible budget is prepared then the budget variances calculated will provide a better indication of performance since actual results will be compared against an appropriate benchmark.

The fixed budget however provides more insight into actual performance.

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