2.2.4 Budgets

Question 1

Define a budget?

Answer 1

financial plan for future setting target to be met and how spending is financed

Question 2

4 purposes of a budget?

Answer 2

guide of what firm want to achieve
help control expenditure
communication
forecasting

Question 3

Define extrapolation?

Answer 3

assuming past trends will continue into future

Question 4

Define zero-based budgets?

Answer 4

start with no assumptions based on experience

Question 5

What is a variance analysis?

Answer 5

indicates how the business is performing against budgets

Question 6

What is a favourable variance?

Answer 6

actual figures are better than planned ones

Question 7

What is an adverse variance?

Answer 7

worse than planned ones

Question 8

3 difficulties of budgeting?

Answer 8

historical figures are not always reliable
economic values change
taxation can increase

Question 9

2 adv of zero - based budget?

Answer 9

staff motivation may increase

allocation of resources is increased

Question 10

What are the two types of budgets?

Answer 10

sales and production budgets

Question 11

What is a production budget?

Answer 11

shows all planned production costs

Question 12

What is a sales budget?

Answer 12

shows the sales level