Question

13.

Partial budgeting can be used to analyze potential changes in:

	a.	Input/output combinations
	b.	Input substitution
	c.	Enterprise combinations
	d.	All of the above

14.

Which of the following will increase overall profit?

	a.	Additional revenue and additional costs
	b.	Additional revenue and reduced costs
	c.	Additional costs and reduced revenue
	d.	Reduced costs and reduced revenue

15.

Which of the following will reduce overall profit?

	a.	Additional revenue and additional costs
	b.	Reduced costs and reduced revenue
	c.	Additional revenue and reduced costs
	d.	Additional costs and reduced revenue

Answer 1

13. Partial budgeting is a management tool that can compare the costs and returns that are affected by a potential change in a business. It is especially useful in evaluating budgets that involve small, specific, and limited changes within a business by helping to determine the profitability of that change. Therefore it can be used to analyze - d) All of the above

14. Profit of a firm = Revenue - Costs. Therefore, for increase in profits - b) Additional revenue and reduced costs.

15. Similarly, for lower profit - d) Additional costs and reduced revenue.