3.9 - Budgets Flashcards
Define cost center
Unit is a business to which cost can be allocated for accounting purpose
Define profit center
A unit of a business to which cost and profits can be allocated for accounting purposes;
By function, product, store, region, office
What is the purpose of a budget
To see how efficiently costs are minimised and profits are maximised in diffferent parts of a business
Why are cost and profit centers goood
- efficiently monitoring
- design making and planning
- motivator
- new perspectives
Why are cost and profit centers bad
- stress
- qualitative factos ignored
- interdependence and coordination are at risk
- not always feasible
Define budget
A financial plan of estimated revenues and expenditures for a future time period
Define budget holder
Person or group of people who formulate budgets and are in charge of their achievements
What are some examples of types of budgets
Master, marketing, staff, sales, production
Define variance
Discrepancy between actual budgeted outcomes
What are the three columns in a budget
Budgeted figures, actual figures, variance
What are the three groups in a budget
Income
Expenses
Net income
What are the positives of a budget
- control
- coordination
- planning
- motivation
- allows them to stay focused
What are the negatives of a budget
- source of conflict
- unnecessary shortcuts
Decreased quality
Bias & underestimates
