Topic Four, Part 7 - Budgets and Variance Flashcards
1
Q
What is a budget?
A
A plan that takes into account the available resources
2
Q
How do budgets help?
A
- Managers can monitor output
- Gives info on staff productivity
- Set objectives in a quantifiable form
3
Q
What is zero budgeting?
A
all budgets set to zero and managers have to justify fund requirements
4
Q
What are flexible budgets?
A
Flexible budgets makes allowances for changes in the level of sales
5
Q
What is the variance?
A
Difference between budgeted cost or income vs Actual cost or income
6
Q
What is an adverse variance?
A
The actual result is worse than the forecasted cost or income
7
Q
What is a favourable variance?
A
The actual result is better than the forecasted cost or income
8
Q
How do budgets improve liquidity?
A
Can delay and demand payments when needed
