Chapter 2

Question 1

What is cost leadership?

Answer 1

Business strategies focused on making products or services the least expensive and therefore the most competitive in the market.

Question 2

What is differentiation?

Answer 2

Business strategies based on emphasising the quality of a product which make it different and superior to its competition.

Question 3

Define a budget.

Answer 3

A budget is a written financial projection showing how activities and resources will be used during a specified period to achieve an organisations objectives.

Question 4

What are two key features of budgets?

Answer 4

Planning for the future & are expressed in quantitative terms, either physical or monetary.

Question 5

What are the three main purposes of budgeting?

Answer 5

Planning, coordinating and controlling.

Question 6

What do budgets assist management in (5)?

Answer 6

Encourage planning
Coordinate departments
Communicate business objectives
Motivates employees
Setting targets

Question 7

Define the master budget

Answer 7

The master budget consists of all the interrelated budgets necessary to determine the key financial objectives of a business. Usually consists of the budgeted income statement and balance sheet, which represent a summary of the individual operational and financial budgets of the organisation.

Question 8

What does the master budget consist of (6)?

Answer 8

Budgeted income statement
Cash Budget
Sales
Production/Purchase
Expenses
Capital expenditure

Question 9

Define a budgeted income statement

Answer 9

The budgeted income statement shows the expected income and expenses for the budget period and the expected profit or loss

Question 10

What are some financial measures of performance (4)?

Answer 10

Revenue
Turnover
Costs
Profit

Question 11

What are some non-financial measures of performance (3)?

Answer 11

Customer satisfaction
Quality of service or production
Employee morale