ExpertEasy2 marksMultiple Choice
ACCA · Question 23 · Budgeting
A company manufactures three products. When preparing the annual budget, management realizes that the total skilled labor hours required to meet market demand for all three products is 50,000 hours, but only 40,000 hours are available. Materials and machine time are abundant.
In this scenario, what is skilled labor known as?
A company manufactures three products. When preparing the annual budget, management realizes that the total skilled labor hours required to meet market demand for all three products is 50,000 hours, but only 40,000 hours are available. Materials and machine time are abundant.
In this scenario, what is skilled labor known as?
Answer options:
A.
The principal budget factor
B.
The fixed overhead driver
C.
The bottleneck variance
D.
The master budget constraint
How to approach this question
Identify the resource that restricts production from meeting demand. In budgeting, this is called the principal budget factor.
Full Answer
A.The principal budget factor✓ Correct
The principal budget factor (or limiting factor) is the factor that limits the activities of an organization. It is usually sales demand, but can be a production resource like labor or materials. The budget must be built around this limiting factor.
Common mistakes
Choosing a generic term like 'constraint' instead of the specific syllabus term.
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