Key Terms In Budgeting Flashcards
What is price skimming?
Setting high prices which will provide high profit per unit.
However, competitors may copy and demand may decrease.
What is penetration pricing?
Setting a low price on sales to encourage a high level of demand.
What is goal congruence?
Everyone taking part and achieving the same overall goals
What is dysfunctional behaviour
Behaviour which is in own interest but not in line with the business as a whole.
What is bottom up?
Budgets prepared by functional managers to create a master budget
A: budget set by staff who knows what’s achievable and what isn’t.
D: budgets can be set too easy so that it’s met or exceeded.
What is top down?
A system where budgets are imposed on the organisation by senior managers.
A: more time efficient as less input from more staff members
D: potential for underperformance if budget is not achievable or realistic
What is limited factors?
Issues that determines the level of output for a company. E.g size of the market or available capacity
What is a budget manual?
A document containing information about how an organisations policies on budgeting is implemented.
What is feedback
Information obtained and reported after comparing the budgeting and actual results
What is feedforward?
Information about current performance of an organisation which is used in budgeting for future purposes.
Budget holder
Manager responsible for a specific budget and the actual performance which is measured against the budget
Budgetary slack
The result of budget data based on over-estimation of costs or under-estimation of income
What is standard costing?
A technique that can be used alongside budgeting where expected costs are calculated for each product and its components
