Budgets 5.5

Question 1

Define the term “Budget”

Answer 1

A detailed financial plan for the future.

Question 2

Define the term “Budget holder”

Answer 2

Individual responsible for the initial setting and achievement of a budget.

Question 3

Define the term “Variance analysis”

Answer 3

Calculating differences between budgets and actual performance, and analyzing reasons for such differences.

Question 4

Define the term “Delegated budgets”

Answer 4

Giving some delegated authority over the setting and achievement of budgets to junior managers.

Question 5

Define the term “Incremental budget”

Answer 5

Uses last year’s budget as a basis and an adjustment is made for the coming year.

Question 6

Define the term “Flexible budgeting”

Answer 6

Cost budgets for each expense are allowed to vary if sales or production vary from budgeted levels.

Question 7

Define the term “Zero budgeting”

Answer 7

Setting budgets to zero each year and budget holders have to argue their case to receive any finance.

Question 8

Define the term “Adverse variance”

Answer 8

Exists when the difference between the budgeted and actual figure leads to a higher-than-expected profit.