budgets

Question 1

list purposes of budgets

Answer 1

financial plan and spending limit
managers must think ahead

Question 2

why would a budget be set up

Answer 2

to plan
motivate
decisions
control

Question 3

define budget

Answer 3

forecasts or plans for the future finances of a business s

Question 4

what are the three types of budgets

Answer 4

income
expenditure
profit

Question 5

define income budgets

Answer 5

target set for amount of revenue to be achieved in a set time period

Question 6

define expenditure budgets

Answer 6

informs predicted cash outflows

Question 7

define profit budgets

Answer 7

used to inform decision making on products to include in the business portfolio as well as where cuts may be needed

Question 8

define historical figures

Answer 8

based on previous years
can be adjusted in line with actual outcomes

Question 9

define zero based

Answer 9

setting a budget of zero
time consuming but flexible and can reduce waste
all departments must justify requests for expenditure

Question 10

define adverse

Answer 10

bad variance

Question 11

define favourable

Answer 11

good variance

Question 12

list causes of variance

Answer 12

actions of competitors
actions of suppliers
changes in economy
internal efficiency
internal decision making

Question 13

list difficulties

Answer 13

dependent upon forecasts
costs subject to change
managers may lack experience
may be subject to bias