Topic Four, Part 7 - Budgets and Variance Flashcards

1
Q

What is a budget?

A

A plan that takes into account the available resources

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2
Q

How do budgets help?

A
  • Managers can monitor output
  • Gives info on staff productivity
  • Set objectives in a quantifiable form
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3
Q

What is zero budgeting?

A

all budgets set to zero and managers have to justify fund requirements

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4
Q

What are flexible budgets?

A

Flexible budgets makes allowances for changes in the level of sales

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5
Q

What is the variance?

A

Difference between budgeted cost or income vs Actual cost or income

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6
Q

What is an adverse variance?

A

The actual result is worse than the forecasted cost or income

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7
Q

What is a favourable variance?

A

The actual result is better than the forecasted cost or income

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8
Q

How do budgets improve liquidity?

A

Can delay and demand payments when needed

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