SITXFIN004 - Week 2 Practice Question

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SITXFIN004
Week 2 Practice Question

Q1.
List 5 components of an Operating Budget:
Q2.
Indicate if the following statements relating to the budgeting process are true or false.
True False
1. The process of preparing a draft budget usually involves entering all the
projected income, expenses, purchases, staffing requirements, etc into a
spreadsheet or accounting program.
2. The budgeting process requires strong negotiation skills.
3. It is important to convince staff of the achievability of the budget.
4. Involving staff in the budgeting process can be a costly, time wasting process.
5. If staff are positive about the budget, they are more likely to support it and do
their best to work towards the targets that have been set.
Q3.
List 5 examples of people (job roles) you would circulate the draft budget to for feedback or approval:
AIC- SITXFIN004-OA2 Page 1 of 5

Q4.
Indicate if the following statements relating to reviewing feedback from the draft budget are true or false:
True False
1. When a suggestion is received from a staff member it must be included in the
final budget.
2. Once the draft budget is created, suggestions cannot be included into the final
budget.
3. The budget preparation must include an analysis of the priorities of each
request.
4. Every department will feel that their request is the most urgent and important.
5. The General Manager and owners may have a different opinion to staff about
the importance of requests.
6. Each change requested should be given a priority and the effects if implemented
must be considered.
7. If a high priority item is required, this may mean that many other requests
cannot be granted.
8. If the feedback is relevant and approved, it should be amended in the draft
budget.
Q5.
List 3 aspects you should consider when a staff member suggests a change or alteration to the budget:
Q6.
Indicate whether the following statements in regard to monitoring budget are true or false:
True False
1. Monthly reviews of the budget against actuals is an important tool of budget
management.
2. In most businesses/industries the budget is completed by the end of the
financial year, for the next financial year.
3. Every revenue and expense item on the Profit and Loss Statement for every
department should be compared to the budgeted figure.
4. It is important to undertake further investigation into budget variances,
whether they are over or under.
5. Budget variances and impacts should be reviewed at the end of the financial
year.
6. Managers should include budget variances as well as an overall picture of the
running of the department in their monthly report.

Q7.
Briefly explain the following types of reports:
Cashflow Reports:
Occupancy reports:
Sales reports:
Variance reports:
Expenditure reports:
Q8.
Briefly explain the following types of reports:
Covers reports:
Stock reports:
Wastage reports:
Purchase summary report:
Q9.
Which types of business must file a Business Activity Statement? What are the components of a
Business Activity Statement?

Q10.
What is meant by being “over” or “under” budget? Which type would represent a favourable variance?
Q11.
Indicate whether the following statements in regard to analysing budgets are true or false:
True False
1. Wages can often vary from budget.
2. The only way to meet budget targets and savings is to cut expenditure.
3. Raising revenue will affect budget in a negative sense as expenses will increase
more than the amount of revenue.
4. Net profit is impacted negatively by an increase in revenue.
5. Raising average spend by up-selling is an effective way to increase profitability.
6. If the projected sales figures are $200,000 and the actual sales figure is
$240,000 – this represents a favourable variance of 20%.
7. If the projected sales figures are $150,000 and there is a favourable variance of
10%, the actual sales figures are $165,000.
Q12.
What is the importance of communicating staff’s responsibilities to help achieve budget?
Q13.
List 3 occurrences which would result in achieving a favourable variance in profit:

Q14.
Indicate whether the following statements in regard to reviewing budgets are true or false:
True False
1. All variances throughout the year must be collated to update the budget on an
ongoing basis.
2. The budget target cannot be amended and must be met regardless of changes
in circumstances.
3. Internal and external analysis is a must for assessing budget impacts.
4. Management must assess factors such as price increases by suppliers to manage
the budget.
5. Future budgets are often based on last year’s budget.
6. The department managers do not have to use numeracy and literary skills to
interpret financial data as it is done by the Finance department.
Q15.
Explain the process of updating budgets:
Q16.
In order to have a budget change approved, you must prepare a report. List 5 details that must be included in
the report:
Q17.
Often the staff on the front line will have more of an idea of the reasons for the variance than the manager will,
and will be able to give suggestions for improvement (True or False)
Q18.
List 6 factors that can cause variances in staff budgets:

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Australian Ideal College

Registered as Australian Ideal College Pty Ltd

Week 2 Practice Question

AIC- SITXFIN004-OA2 Page 1 of 5

AIC- SITXFIN004-OA2 Page 2 of 5

AIC- SITXFIN004-OA2 Page 3 of 5

AIC- SITXFIN004-OA2 Page 4 of 5

Explain the process of updating budgets:

List 6 factors that can cause variances in staff budgets:

AIC- SITXFIN004-OA2 Page 5 of 5

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