Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is a partial budget?

1. A budget for a whole year

2. A budget focusing on capital expenditures

3. A budget that includes only income statement items that change

4. A budget with fixed costs only

The correct answer is: A budget that includes only income statement items that change

A partial budget is specifically designed to assess the financial implications of small-scale changes in operations rather than looking at the entire financial picture of a business over an extended time frame. It focuses on evaluating the income and expenses related to specific, incremental changes in production or sales. By concentrating on only those items that are expected to change—such as additional income generated from a new product line or the costs incurred from hiring additional labor—a partial budget allows managers to make informed decisions about adjustments without needing a comprehensive view of the entire budget. In contrast, a budget for a whole year typically encompasses all projected incomes and expenses over that period, making it a broader view of financial planning. A budget that focuses on capital expenditures is tailored specifically to investments in long-term assets, rather than short-term operational changes. A budget with fixed costs only disregards the variable and changing elements, which are crucial for understanding the impact of specific alterations in business operations. This makes option C the correct choice, as it encapsulates the unique and targeted nature of a partial budget.