CAF-7 · Chapter 11 · Question 13 of 15
A business discovers that its ability to sell goods is practically unlimited, but it is severely restricted by a global shortage of a specific raw material. In budgeting terminology, this restricted raw material is known as the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Principal budget factor (or limiting factor)
Explanation
The principal budget factor (or limiting factor) is the specific constraint that restricts the organization's expansion or operations. When a limiting factor exists (like a material shortage), it must dictate the starting point of the entire budgeting process.
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