Budgeting

Question 1

What does a manager use to set a budget

Answer 1

Market research
Past sales trends
Forecasts
What product it is
distribution channel used

Question 2

What is an expenditure budget

Answer 2

budget to cover operations: labour cost, materials costs

Question 3

Pros of budgets

Question 4

Cons of budgets

Answer 4

Only reliable if data/market research is reliable
Past trends may not be accurate forecasts

Question 5

What is variance analysis

Answer 5

Analyses the budgets accuracy by comparing forecast data to the actual figure.
Its the difference between real and forecast

Question 6

what is adverse variances?

Answer 6

Costs were higher than expected
Revenue/profits were lower than expected

Question 7

what is favourable variances?

Answer 7

Costs were lower than expected in the budget
Revenue/profits were higher than expected

Question 8

Cash flow forecast

Answer 8

forecasts the cash inflows (receipts) and outflows (expenditure)

Question 9

Example outflows

Answer 9

salaries
other costs

Question 10

Example inflows

Answer 10

cash sales
credit sales

Question 11

What is net cash flow

Answer 11

Difference between inflow and outflows