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All questions of Budgetary Control for B Com Exam

What is the primary purpose of budgetary control in an organization?
  • a)
    To maximize profits
  • b)
    To set budgets for various departments
  • c)
    To control costs and achieve financial goals
  • d)
    To eliminate waste in production
Correct answer is option 'C'. Can you explain this answer?

Dev Patel answered
Budgetary control in an organization primarily serves the purpose of controlling costs and achieving financial goals. It involves the preparation of budgets, coordination of departments, and comparing actual performance with budgeted figures to ensure efficient resource allocation and cost control.
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Which of the following is NOT an objective of budgetary control?
  • a)
    To anticipate capital expenditure for the future
  • b)
    To eliminate waste and increase profitability
  • c)
    To determine the number of employees needed
  • d)
    To fix responsibilities within the organization
Correct answer is option 'C'. Can you explain this answer?

Akash Mehra answered
Budgetary control is a management technique that involves the use of budgets to evaluate the performance of an organization and make necessary adjustments to achieve its financial goals. It helps in monitoring and controlling the financial activities of an organization by comparing actual results with budgeted figures. The primary objective of budgetary control is to ensure effective financial management and achieve organizational goals.

Let's examine each option to identify which one is not an objective of budgetary control:

a) To anticipate capital expenditure for the future: This objective focuses on forecasting and planning for future capital expenditures. It involves estimating the amount of money that will be required for long-term investments in assets such as equipment, machinery, or buildings. By anticipating capital expenditure, an organization can allocate resources effectively and plan for funding sources to support these investments. This objective is aligned with budgetary control as it helps in financial planning and resource allocation.

b) To eliminate waste and increase profitability: This objective aims to identify and eliminate unnecessary expenses or wasteful practices within an organization. By closely monitoring budgeted figures and comparing them with actual results, budgetary control helps in identifying areas of inefficiency and waste. By eliminating waste, organizations can reduce costs and increase profitability. This objective is an essential component of budgetary control as it promotes cost-consciousness and efficiency.

c) To determine the number of employees needed: This option is NOT an objective of budgetary control. Determining the number of employees needed is primarily a human resource management function. It involves assessing staffing requirements based on workload, job responsibilities, and organizational goals. While budgetary control can provide financial information related to labor costs, it does not directly determine the number of employees needed.

d) To fix responsibilities within the organization: This objective focuses on assigning specific responsibilities and accountabilities to individuals or departments within an organization. By clearly defining roles and responsibilities, budgetary control helps in ensuring accountability and promoting effective decision-making. It helps in identifying areas of responsibility for budget preparation, budget execution, and performance evaluation. This objective is an integral part of budgetary control as it enhances transparency and accountability.

In conclusion, the option "c) To determine the number of employees needed" is not an objective of budgetary control. Budgetary control primarily focuses on financial planning, cost control, and performance evaluation rather than determining staffing requirements.

What does a performance budget focus on in an organization?
  • a)
    Financial resources allocation
  • b)
    Achieving specific performance objectives
  • c)
    Estimating actual expenses
  • d)
    Identifying waste in production
Correct answer is option 'B'. Can you explain this answer?

Dev Patel answered
A performance budget focuses on achieving specific performance objectives within an organization. It is a work plan that aims to align activities with organizational goals and objectives.

What does Zero Base Budgeting (ZBB) require managers to do?
  • a)
    Justify their entire budget requests from scratch
  • b)
    Automatically approve all budget requests
  • c)
    Use the previous year's budget as a baseline
  • d)
    Focus only on incremental budgeting
Correct answer is option 'A'. Can you explain this answer?

Dev Patel answered
Zero Base Budgeting (ZBB) requires managers to justify their entire budget requests from scratch, without assuming that existing activities and expenses are automatically approved. It involves a systematic review and evaluation of all budget items.

What is the primary purpose of a sales budget?
  • a)
    To estimate actual sales
  • b)
    To determine pricing policies
  • c)
    To develop a plan for future sales
  • d)
    To track seasonal variations
Correct answer is option 'C'. Can you explain this answer?

Dev Patel answered
The primary purpose of a sales budget is to develop a plan for future sales. It helps in setting sales targets and objectives for a specific budget period, guiding operational efforts toward achieving those goals.

What is the main advantage of using Zero Base Budgeting (ZBB)?
  • a)
    It reduces paperwork and administration
  • b)
    It automatically approves all budget requests
  • c)
    It motivates managers to find cost-effective solutions
  • d)
    It relies on previous year's budgets for guidance
Correct answer is option 'C'. Can you explain this answer?

Dev Patel answered
The main advantage of Zero Base Budgeting (ZBB) is that it motivates managers to find cost-effective solutions and encourages them to critically evaluate budget requests, leading to potential cost savings and improved efficiency.

How does budgetary control help in an organization's decision-making process?
  • a)
    By automatically approving all budget requests
  • b)
    By eliminating the need for budget committees
  • c)
    By providing a systematic method for evaluating performance
  • d)
    By relying on historical data for budget preparation
Correct answer is option 'C'. Can you explain this answer?

Dev Patel answered
Budgetary control helps in an organization's decision-making process by providing a systematic method for evaluating performance, comparing actual results with budgeted figures, and making informed decisions based on deviations and performance data.

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