Theme 2 Flashcards

1
Q

What are the three types of budgets?

A

Income budget, expenditure budget, and profit budget

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2
Q

What is an income budget?

A

The amount of revenue entering the business

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3
Q

What is an expenditure budget?

A

Total costs per year

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4
Q

What is profit budget?

A

Income- expenditures budgets

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5
Q

What is historical budgeting?

A

Comparing budgets to last year’s data

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6
Q

What the benefit of historical budgeting for a small business?

A

Base on previous year
More likely to know they won’t overspend
Easier to manage cash
Higher chance of good liquidity

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7
Q

What is zero based budgeting?

A

Departments pitch ideas and ask for certain budgets based on why they need it

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8
Q

How can historical budgeting lead to increase motivation?

A

Set targets for departments
Incentivise to meet them
Increase motivation

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9
Q

What is variance analysis?

A

The difference between budgeted and actual figure

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10
Q

What is a favourable variance?

A

Where there is more actual profits than budgeted

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11
Q

What is an adverse variance?

A

When there are less actual profits than budgeted

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12
Q

How do you calculate variance?

A

Actual-budgeted

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13
Q

What are the four methods of production?

A

Job, flow, batch, cell

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14
Q

What is job production?

A

One off specific products

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15
Q

What is the benefit of job production?

A

The products are specialised so can become differentiated being more price inelastic

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16
Q

What is the drawback of job production?

A

No eos

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17
Q

What is batch production?

A

Making different products in batches. E.g. Jean sizes

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18
Q

What are the advantages of batch production?

A

Downtime for machines
Change products to keep up with changing trends
Have multiple products for changing trends spread risk

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19
Q

Drawback of batch production

A

No eos due to lower output

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20
Q

What is the disadvantage of batch production?

A

Lower output meaning no eos

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21
Q

What is flow production?

A

Large volumes of one type of product

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22
Q

What is the advantage of flow production?

A

High levels of output achieve eos

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23
Q

What is the disadvantage of flow production?

A

No downtime for machines
Staff have same job may be demotivated

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24
Q

What is cell production?

A

A team doing one part of production at a time together

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25
Q

What are cell production advantages?

A

Task culture
Teamwork means motivation mayo

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26
Q

What is the disadvantage of cell production?

A

Employees need skills across production process increasing training cost

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27
Q

What is labour intensive production?

A

Over 50% of production done by people

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28
Q

What are the benefits of labour intensive production?

A

More flexible to adapt product as don’t have to adapt machines increasing differentiation
Put handmade on product get a usp

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29
Q

What is the drawback of labour intensive production?

A

Less units made than if used machine so less eos

30
Q

What is capital intensive production?

A

Over 50% of production done by machines

31
Q

What is the benefit of capital intensive production?

A

Machines produce more and spread fixed costs over more units

32
Q

What is the drawback of capital intensive production?

A

Invest in machines worsen liquidity

33
Q

What is a limitation of a stock control diagram?

A

Based on historical data (sales forecast) to predict demand. If pestle economic factors change demand will change so reorder level wrong. Order wrong amount of stock

34
Q

What is lean production?

A

Minimising waste to become more efficient during production

35
Q

What is just in time management?

A

Business keeps as little stock as possible to reduce waste

36
Q

What is the advantage of just in time management?

A

Lower cash outflows to suppliers
More positive net cashflow
Good liquidity

37
Q

What is the drawback of just in time management?

A

Don’t bulk buy so no discount for bulk buying. No purchasing eos

38
Q

What is quality control?

A

Testing product at the end of production

39
Q

What is the advantage of quality control?

A

Less training so less expensive

40
Q

What is the disadvantage of quality control?

A

More time consuming to remake product when there’s defects
Can’t test all products so defects slip through

41
Q

What is quality assurance?

A

Checking quality throughout production

42
Q

What are the advantages of quality assurance?

A

Employees have more responsibility so feel more trusted increasing motivation
Catch problems early so less time fixing product

43
Q

What is the disadvantage of quality assurance?

A

If employees miss a fault it stays in end product
More cash outflows on staff training

44
Q

What is a quality circle?

A

Meet and discuss how to improve quality

45
Q

What are the benefits of quality circles?

A

Adopt a task culture increasing ideas
Teamwork motivates through mayo or maslows love and belonging

46
Q

What is a disadvantage of quality circles?

A

Must be highly skilled

47
Q

What is kaizen?

A

Making continuous improvements to the production process

48
Q

What is the best culture for kaizen?

A

Person as employees have freedom to develop new ideas

49
Q

What culture won’t work with kaizen?

A

Power as employees need to be highly skilled and have freedom to make decisions

50
Q

What is total quality management?

A

Getting the product right the first time by improving quality at every stage

51
Q

What are the best cultures for total quality management?

A

Task as high skilled employees work in teams to check for defects
Role as there are rules and regulations to keep quality

52
Q

What is a drawback of total quality management?

A

High levels of bureaucracy to make sure things are highest possible quality

53
Q

What are the disadvantages of high interest rates?

A

Increased cost of loans/ mortgages. Lower disposable incomes. Less spending on luxury and normal.

Increase cost of borrowing. Increased loan repayments. Increased fixed costs. Lower op

54
Q

What are the benefits of low interest rates?

A

Cheaper to borrow money. Products look more affordable. Increase incentive to spend. Increase demand for luxury/normal.

Less mortgage repayments. Higher disposable incomes. Increase spending on luxury/normal

55
Q

What is demand pull inflation?

A

When increase demand raises the prices

56
Q

What is cost push inflation?

A

Increasing costs to make product means higher prices charged

57
Q

What is the drawback of high inflation?

A

Increase cost of raw materials. Increase cost of sales. Increase selling price higher than cost of sale. Fall in demand

58
Q

What is the advantage of low inflation?

A

Prices stable. Wages increase more than inflation. Increase spending on luxury/normal

59
Q

What is exchange rate appreciation?

A

Rise in pound against foreign currency

60
Q

What is exchange rate depreciation?

A

Fall in pound against foreign currency

61
Q

What is the affect of exchange rate appreciation?

A

Higher imports
Lower exports

62
Q

What is the affect of exchange rate depreciation?

A

Lower imports
Higher exports

63
Q

What is fiscal policy?

A

Tax and government spending

64
Q

What are business legislation?

A

Laws set by the government that have an impact on business

65
Q

What are the five business legislations?

A

Consumer protection
Employee protection
Environmental protection
Competition policy
Health and safety

66
Q

What is consumer protection legislation?

A

Making sure consumers get a fair exchange for their money

67
Q

What is an advantage of consumer protection legislation?

A

Increase confidence in the brand

68
Q

What is the drawback of consumer protection legislation?

A

Might need to improve quality management ti make sure product fit for purpose

69
Q

What are the five types of employee protection legislation?

A

Minimum wage
Right to contract of employment
Sick/maternity/paternity leave
Redundancy
Trade union rights

70
Q

What is the advantage of employee protection legislation?

A

Employees feel more secure in job and according to maslows safety needs increase motivation