Chapter 32: Budgets Flashcards

1
Q

Define budget holder

A

Budget holder: individual responsible for the initial setting and achievement of a budget.

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2
Q

Define variance analysis

A

Variance analysis: calculating differences between budgets and actual performance, and analysing reasons for such differences.

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3
Q

Define budget

A

Budget: a detailed financial plan for the future.

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4
Q

Define delegated budgets

A

Delegated budgets: giving some delegated authority over the setting and achievement of budgets to junior managers.

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5
Q

Define incremental budget

A

Incremental budgeting: uses last year’s budget as a basis and an adjustment is made for the coming year.

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6
Q

Define flexible budget

A

Flexible budgeting: cost budgets for each expense are allowed to vary if sales or production vary from budgeted levels.

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7
Q

Define zero budgeting

A

Zero budgeting: setting budgets to zero each year and budget holders have to argue their case to receive any finance.

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8
Q

Define adverse variance

A

Adverse variance: exists when the difference between the budgeted and actual figure leads to a lower-than-expected profit

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9
Q

Define favorable variance

A

Favourable variance: exists when the difference between the budgeted and actual figure leads to a higher- than-expected profit.

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