Budgets | Theme 2 Flashcards
What does control and monitoring do?
Allows management to control the business by setting objectives and targets
What does planning do?
Forces managers to think ahead. Stops them from only dealing with problems as they arise
Co-ordination
Control activities in many different departments and operating sites
Communication
GIves managers and workers a clear framework within to operate. Removes uncertainty in decision-making
Efficiency
Delegate decision-making to employees as managers cannot efficiently make every decision on behalf of their employees
Motivation
Provides workers with targets and standards. Improving the budget is an indication of success
Historical budgets
Use last years figures as the basis for the budget. Realistic in that it is based on actual results
Zero-based budgets
Budget costs and revenues are set to zero. Budget is based on new proposals for sales and costs
Revenue budget
Expected revenues and sales
Cost budget
Expected costs based on sales budgets
Profit budget
Based on the combined sales and cost budgets
Analyse market
Market size and growth
Variance anaysis
Calculating and investigating the differences between actual results and the budget
What can variances be?
Positive/favourable or adverse/unfavourable
Favourable variances
Actual figures are better than budgeted figures
Adverse variances
Actual figure worse than budget figure
