Specific budgets Benefits

Question 1

Give 3 examples of benefits of specific budgets…

Answer 1

Target setting
Improved planning
Control
Improved decision making etc

Question 2

Target setting

Answer 2

While all the specific budgets are useful for target setting, the sales budget is especially helpful, and should be in line with the objectives of the business.

Question 3

Improved planning

Answer 3

Assists with levels of production, purchases and labour hours. Also for planning how to deal with cash deficits.

Question 4

Control

Answer 4

Assists with purchases costs, labour costs and any expenses in the cash budget.

Question 5

Monitoring and calculations of variances

Answer 5

The sales budget, purchases budget, labour budget and cash budget can be used to monitor and calculate variances.

Question 6

Communication and coordination between departments

Answer 6

The sales budget will need to be communicated to those responsible for production, purchases and labour budgets, so that the required number of goods are produced.

Question 7

Improved decision making.

Answer 7

Cash budget helps managers make decisions about managing cash flow and obtaining finance. Also the other budgets will help decision-making in those specific departments.