component 1 - Business functions Flashcards
give 3 methods of budgeting
-budgeting according to company objectives
-budgeting according to competitor’s spending
-budgeting according to last years budget allocations
give 3 pros of setting budgets
-provides quantifiable target
-informs business decision making
-motivates budget holders
give 3 reasons for setting a budget
-to gain financial support
-to establish priorities
-to improve efficiency
give 3 cons of setting a budget
-dependent upon predictions and forecasts
-manager may lack experience
-may be time consuming
what is variance?
the difference between the budget and the actual
what is the formula for variance?
variance = budget figure - actual figure
give 2 types of variance
-favourable and adverse
what is favourable variance?
either when income is greater than budgeted income or actual costs are lower than budgeted (favourable to the business)
what is adverse variance?
when actual income is less than budgeted or actual costs are higher than budgeted (non favourable to the business)
what is variance analysis?
finding reasons for any variances
give 3 possible causes of variances
-actions of competitors
-actions of suppliers eg price changes
-changes in the economy
give 3 possible responses to variances
-change budgets
-change suppliers
-staff training
Give 2 types of sampling
quota and random
what is quota sampling?
a sampling method that involves the segmentation of the population into different sub groups based on characteristics and then a number is selected from each group
what is random sampling?
a sampling method where each member of the population has an equal chance of being selected
give 2 cons of quota sampling
-not randomly chosen/representative
-higher levels of bias
give 3 pros of quota sampling
-quick
-easy to manage
-cheaper than alternatives
Give 2 pros of random sampling
-minimises bias
-simple to design and interpret
give 2 cons of random sampling
-it assumes all members of the population are the same
-not always representative
give the 4 types of businesses in the private sector
-PLC
-LTD
-sole trader
-partnership
give 3 pros of the public sector
-help fund new businesses which boost economy
-goods/services help raise economies standard of living
-helps provide essential services/needs to all
give 3 pros of the private sector
-raises profit and pays tax which helps economy
-provide jobs
-supplies and meets customer wants
what is a social enterprise?
a business the trades for a social or economic purpose
give 3 factors a business should consider when choosing where to locate
-proximity to market
-nearby competition
-costs
