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CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control

Rao Pharma Ltd prepares a 12-month rolling budget and updates it every quarter. At the end of the quarter ending June, what does the company do?

Under a rolling budget, the company drops the expired quarter and adds a fresh quarter at the end, so the budget always covers the next twelve months and is revised with latest information.

  1. ADiscards the budget and starts the full year from zero
  2. BDrops the completed quarter and adds a new quarter so the budget again covers 12 monthsCorrect
  3. CKeeps the original budget unchanged until the year ends
  4. DAdjusts only the sales figures of the completed quarter

Explanation

A rolling budget is continuously updated: the expired period is removed and a new period added, so the horizon stays constant at 12 months. Keeping the budget unchanged describes a static annual budget.

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