Budgets

Question 1

Objectives (advantages) of budgets

Answer 1

1) Budgets compel planning
2) Promote the coordination of activities
3) Promote communication in the organisation.
4) Provide a basis for performance evaluation.

Question 2

Disadvantages of budgets

Answer 2

1) Time consuming
2) Based on forecasts
3) High administrative costs
4) Disconnected from strategy

Question 3

Types of budgets?

Answer 3

1) Sales budget
2) Cost of sales budget
3) Production budget
4) Direct material usage budget
5) Direct material purchases budget
6) Direct labour budget
7) Manufacturing overhead budget
8) Inventory budget
9) Selling and administration budget
10) The master budget
11) Cash budgets

Question 4

Alternatives budget approach

Answer 4

1) Activity-based budgeting
2) Zero-based budgeting
3) Kaizen budgeting
4) Beyond budgeting

Question 5

Factors that are taken into account

Answer 5

1) Historical data
2) Decisions made by competitors
3) State of local and world economy
4) International markets
5) Effectiveness of advertising and promotional policies
6) Effects of seasonal fluctuations
7) Stability of supplies.

Question 6

Key factors in preparing a cash budget

Answer 6

1) opening balance
2) cash flows from operations (excl non-cash items)
3) Time of debtor cash receipts
4) Incl. non-operating cash items
5) Credit payments

Question 7

What is the flexible budget?

Answer 7

Calculation of the expected or estimated total cost to be incurred for the actual activity level.

Question 8

The use of budgets?

Answer 8

1) Control income and expenditure.
2) Establish priorities and set targets
3) Provide direction and coordination, so that business objectives can be turned into practical realities
4) Assign responsibilities to budget holders and allocate resources.