CA Inter P4 · Chapter 14 · Question 6 of 7
The factor that limits the activities of an organisation over the budget period and therefore determines the order in which functional budgets are prepared is known as the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Principal budget factor
Explanation
The principal (key or limiting) budget factor, often sales demand but sometimes materials, labour or machine capacity, restricts the level of activity. The budget for that factor is prepared first and the other functional budgets are built around it.
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