Budgets and variance

Question 1

What is a budget ?

Answer 1

A plan for the future which considers the resources available / allows managers to monitor revenues

Question 2

Reasons for budgeting ?

Answer 2

Measures effectiveness
Info on productivity levels
Make strategy on financial goals
Helps managers manage departments

Question 3

What is zero budgeting ?

Answer 3

When the department budget is set to zero and they have to justify why they need the funds

TIME CONSUMING

Question 4

What is flexible budgets ?

Answer 4

Allowances for finance change with sales .

If sales increase - the need for raw Mats increase

Question 5

What is variance ?

Answer 5

Difference between the budgeted figure and the actual figure

Allows managers to see what areas are doing well or not

Question 6

What does a + variance mean ?

Answer 6

Improves profit

Question 7

What does a - variance mean ?

Answer 7

Reduces profit

Question 8

What are some reasons for a + variance when selling a product

Answer 8

Good ads
Budget set too low
Competitor has left
Lower prices increase sales

Question 9

What are some reasons for a - variance when selling a product ?

Answer 9

Poor ads
Higher costs
Better competition
Higher budget

Question 10

What are some reasons for a + variance in production ?

Answer 10

Lower costs
Economies of scale
Discounts
Incorrect set budget

Question 11

What are some reasons for a - variance in production ?

Answer 11

High costs
Change of suppliers
Material shortage
Incorrect set budget