CIMA BA2 · Chapter 6 · Question 1 of 13
What is meant by the PRINCIPAL BUDGET FACTOR?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The factor that limits the activities of the organisation and therefore determines the level of the other budgets
Explanation
The principal (key or limiting) budget factor is the constraint on the organisation's activity, often sales demand but sometimes machine capacity, labour or materials. It must be identified first because it determines the level of activity on which the other functional budgets are based.
More Budgeting MCQs
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- Q6A company's credit sales are expected to be: January $60,000, February $75,000, March $80,000. Customers pay as follows: 20% in the month…
- Q7What is a FLEXIBLE budget?