Edexcel-Budgets 2.2

Question 1

budget meaning

Answer 1

A budget is a financial plan which sets out costs and revenues.

Question 2

Reasons for budgets

Answer 2

Planning and monitoring
Control
Motivation and efficiency

Question 3

Planning and monitoring

Answer 3

Problems and solutions considered and solved in advance.

Question 4

Control

Answer 4

Review of company and department objectives

Question 5

Motivation and efficiency

Answer 5

Spreads decisions across organisation which acts as motivation for managers.

Question 6

Budgets time?

Answer 6

Budgets set annually and monitored monthly

Question 7

Historical figure budgeting

Answer 7

Based on historical data

Question 8

Zero based budgeting

Answer 8

Dont allocate budgets.

Question 9

Zero based budgeting negatives

Answer 9

Requires spending to be justified
Time consuming

Question 10

Variance Analysis

Answer 10

Difference between figure budgeted and the actual figure.

Question 11

Favourable Variance

Answer 11

Where the actual figure achieved is better than the budgeted

Question 12

Adverse Variance

Answer 12

Where the actual figure achieved is worse than the budgeted figure

Question 13

Adverse Variance

Answer 13

Seek alternative suppliers
Review marketing activities

Question 14

Favourable Variance

Answer 14

Ensure output standards are met
Reward client-facing staff

Question 15

Difficulties of budgeting

Answer 15

Managers focus on short term rather than long term
Unachievable budgets can have a negative impact on motivation
Innaccurate data makes budgets useless.

Question 16

Formula for Calculating Total Profit Variance

Answer 16

Sales revenue-Total costs for both calculations
Actual profit- budgeted profit