32 - Budgets

Question 1

Define budgeting

Answer 1

planning future activities by establishing performance targets, especially financial ones

Question 2

Define budget holder

Answer 2

the individual responsible for the initial setting and achievement of a budget

Question 3

Define variance analysis

Answer 3

calculation of the differences between budgets and actual figures, and analysis of the reasons for such differences

Question 4

Define delegated budget

Answer 4

budgets for which junior managers have been given some authority for setting and achieving

Question 5

Define incremental budgeting

Answer 5

uses last year’s budget as a basis, and an adjustment is made for the coming year

Question 6

Define zero budgeting

Answer 6

sets budgets to zero each year and budget holders have to argue their case for target levels and to receive any finance

Question 7

Define favorable variance

Answer 7

a change from the budget that leads to higher than planned profit

Question 8

Define flexible budgeting

Answer 8

cost budgets for each expense are allowed to vary if sales or output vary from budgeted levels

Question 9

Define adverse variance

Answer 9

a change from the budget that leads to lower than planned profit