Question 1

A tech hardware manufacturer is preparing its master budget. Due to a global supply chain crisis, the company can only source 50,000 microchips this year, despite having customer demand for 80,000 units of their product (each requiring one chip).

In this scenario, what does the supply of microchips represent in the budgeting process?

Accepted Answer

Identify the constraint that limits production/sales. In budgeting terminology, this is the principal budget factor.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Assuming sales demand is always the principal budget factor. While it usually is, material or labor shortages can become the limiting factor.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 5

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