Chapter 32: Budgets Flashcards
Define budget holder
Budget holder: individual responsible for the initial setting and achievement of a budget.
Define variance analysis
Variance analysis: calculating differences between budgets and actual performance, and analysing reasons for such differences.
Define budget
Budget: a detailed financial plan for the future.
Define delegated budgets
Delegated budgets: giving some delegated authority over the setting and achievement of budgets to junior managers.
Define incremental budget
Incremental budgeting: uses last year’s budget as a basis and an adjustment is made for the coming year.
Define flexible budget
Flexible budgeting: cost budgets for each expense are allowed to vary if sales or production vary from budgeted levels.
Define zero budgeting
Zero budgeting: setting budgets to zero each year and budget holders have to argue their case to receive any finance.
Define adverse variance
Adverse variance: exists when the difference between the budgeted and actual figure leads to a lower-than-expected profit
Define favorable variance
Favourable variance: exists when the difference between the budgeted and actual figure leads to a higher- than-expected profit.