Budgeting

Question 1

What are the prod and cons for historical budgeting??

Answer 1

Pro
Drawing up a budget quickly as data is available

Cons
Doesn’t encourage efficiency / as departments allow on being given a certain amount

Question 2

What is zero based budgeting

Answer 2

Sets each budget at zero the start of the year! Departments have to justify every puns they encount for

Question 3

Sales budget?

Answer 3

Forecasts how much will be sold

Question 4

Purchased budget

Answer 4

Outlines the material requirements of the production budget

Question 5

What is production budgeting

Answer 5

Forecast how many units need to be made

Question 6

What is a labour budget?

Answer 6

Outlines the labour requirements of production budget

Question 7

Variance =

Answer 7

Actual level - budgeted level

Question 8

What’s a favourable variance

Answer 8

Where the actual figure is better than planned!

This should give the girl greater profits

Question 9

What are adverse variances

Answer 9

The actual figure is worse than planned

This would give lower profits

Question 10

Favourable variances could be because

Answer 10

1. Wage rises are lower than expected
2. Economic boom leads to extra sales
3. Rising value of the pound mean importing is cheaper

Question 11

What is historical budgeting?

Answer 11

Departments budgets will be drawn up against last ones

Allowances will be known for made changes e.g inflation