6a budgeting Flashcards
(12 cards)
what is a limiting factor?
The constraint that will limit a business’ growth in the following year
What is a master budget?
It is the overall business financial plan made up of a budgeted statement of profit or loss, cash budget and budgeted statement of financial position
What is a functional budget?
It is the individual departmental budget e.g sales, production and finance departments
what is a top-down budget?
It is imposed by management from above with title discussion about how targets are set
what is a bottom up budget?
It is build from detail provided by each manager responsible for a budget with targets being agreed by all involved
What is a variance?
It is the difference between budget and actual sales or expenditure
what is a favourable variance?
Occurs when sales value is more or expenditure is less than budgeted. This will result in a profit higher than budgeted
What is an unfavourable variance?
Occurs when sales value is less, or expenditure is greater than budgeted. This will result in a profit lower than budgeted
What is a price variance?
The difference between budget and actual price multiplied by actual sales volume
What is volume variance?
It is the difference between the budgeted and actual volume multiplied by the budget selling price
