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ACCA Applied Knowledge · Management Accounting · Spreadsheets

A management accountant builds a budget model in which the sales growth rate of 4% is typed directly into many separate formulas. Which design improvement would best reduce the risk of error when the rate changes?

The best improvement is to put the growth rate in one clearly labelled input cell and reference it with an absolute reference. A change is then made once and flows through all formulas, avoiding missed updates that arise when the rate is hard-coded in many separate formulas.

  1. APlace the growth rate in a single labelled input cell and refer to it with an absolute cell referenceCorrect
  2. BHard-code the new growth rate into each formula individually after each change
  3. CHide the columns containing the formulas so users cannot alter them
  4. DConvert all formulas to values once the budget is approved

Explanation

Keeping assumptions in one labelled input cell and referencing it (absolute reference, e.g. $B$2) means a change is made once and flows through every formula. Hard-coding the rate in many formulas risks missed updates. Hiding columns or pasting values does not remove the hard-coding problem, and values stop the model updating.

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