Which of the Following Is an Example of Padding the Budget

question 13

Multiple Choice

Which of the following is an example of padding the budget?

• A) Overestimating sales
• B) Underestimating labour costs
• C) Overestimating direct material costs
• D) Underestimating capital expenditure

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Definitions:

Margin Of Safety

A financial ratio that measures the difference between actual sales and the break-even point, indicating the cushion a company has before incurring a loss.

Break-Even Sales

The point at which total revenues equal total costs, resulting in zero profit.

Operating Leverage

A financial metric that measures the degree to which a firm or project can increase operating income by increasing revenue.

Net Operating Income

A company's revenue minus its operating expenses, excluding taxes and interest, indicating the profitability of its core business activities.