budgeting and budgets

Question 1

budget

Answer 1

• financial plan for future concerning revenue nd costs for business

Question 2

budget uses in management

Answer 2

-allocate resources
-establish priotiries , set targets

Question 3

2 main approaches to budgeting

Answer 3

• historical budgeting - last years figures as basis of budget for this year
  strength - realistic , based on actual results
  limitation -circumstances changed

zero budgeting - budgeted costs and revenue set to 0
strength - based on new proposal
limitation - budgeting more complicated and time consuming

Question 3

3 main types of budgeting

Answer 3

• revenue budget
• cost budget
• profit budget

Question 4

2 key sources of info for budgets

Answer 4

• financial performance in previous years
• market research

Question 5

wats a variance

Answer 5

• when there’s a diff between the actual and budget figures

Question 5

difficulties in budgeting accurately

Answer 5

• sales forecast
  start up firms = harder to estimate sales
  competitors actions hard to predict

costs-
unexpected costs
changes in external factors e.g tax = effects costs

Question 6

2 types of variance

Answer 6

positive/favourable (better than expected)
or
adverse/unfavourable ( worse than expected)

Question 7

causes for favourable variance

Answer 7

-competitor weak = higher sales for u
-selling price increased

Question 8

cause for adverse variance

Answer 8

bad
- unexpected event = unbudgeted costs

good
- higher production costs than budgeted = sales significantly higher than budgeted

Question 9

limitation in budgeting

Answer 9

• inflexibility in decision making
• needs to be changed as circumstances change
• takes time

Question 10

behavioural implications of budgeting

Answer 10

• budgets= demotivating , if imposed rather than negotiated
• unrealistic budget targets=. demotivated