THEME 2- Definitions

Question 1

What is a budget?

Answer 1

A quantitative economic plan prepared and agreed in advance

Question 2

What is meant by budgetary control?

Answer 2

A business system that involves making future plans, comparing the actual results with the planned results and investigating the cause of any differences

Question 3

What is meant by historical figures?

Answer 3

Quantitative information based on past trading records often used by businesses when producing budgets

Question 4

What is meant by a production cost budget?

Answer 4

A firms planned production costs for a future period of time

Question 5

What is a sales budget?

Answer 5

A firms planned production costs for a future period of time

Question 6

What is meant by variance?

Answer 6

The difference between actual financial outcomes and those budgeted

Question 7

What is a variance analysis?

Answer 7

The process of calculating variances and attempting to identify their causes

Question 8

What is meant by Zero-based budgeting?

Answer 8

A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder, often a manager (they are given a zero value)

Question 9

What is amorisation?

Answer 9

The writing off of an intangible asset

Question 10

What is meant by cost of sales?

Answer 10

The direct costs of a business

Question 11

What is exceptional costs?

Answer 11

A one off cost, such as a large bad debt

Question 12

what is gross profit?

Answer 12

The difference between revenue/turnover and cost of sales

Question 13

What is gross profit margin?

Answer 13

Gross profit expressed as a % of revenue/turnover

Question 14

What is operating profit?

Answer 14

The difference between gross profit and business overheards, such as selling and administrative expenses

Question 15

What is an operating profit margin?

Answer 15

Operating profit expressed as a % of revenue/turnover

Question 16

What is net profit? (Profit for the year)

Answer 16

The difference between operating profit and interest and exceptional items

Question 17

What is a net profit margin? (Profit for the year)

Answer 17

Net profit after tax, expressed as a % of revenue/turnover

Question 18

What is a statement of comprehensive income?

Answer 18

A financial document showing a company’s income and expenditure over a particular period of time, usually a year

Question 19

What is revenue/turnover?

Answer 19

The total income of a business resulting from sales of goods or services

Question 20

What is meant by administration?

Answer 20

A failing business appoints a specialist to rescue the business or wind it up

Question 21

What is meant by a external factor?

Answer 21

Factors beyond the control of the business causing it to collapse

Question 22

What is meant by a internal factor?

Answer 22

A factor that a business is able to control, which can cause it to collapse

Question 23

What is meant by overtrading?

Answer 23

The situation where a business does not have enough cash to support its production and sales, usually because its growing too fast

Question 24

What is “batch production”?

Answer 24

A method that involves completing one operation at a time on all units before performing the next

Question 25

What is meant by “capital intensive”?

Answer 25

Production methods that make more use of machinery relative to labour

Question 26

What is meant by “capital productivity”?

Answer 26

The amount of output each unit of capital (e.g one machine) produces

Question 27

What is cell production?

Answer 27

Involves producing a family of products in a small self-contained unit (a cell) within a factory

Question 28

What is meant by “division of labour”?

Answer 28

Specialisation in specific tasks or skills by an individual

Question 29

What is downsizing?

Answer 29

The process of reducing capacity, usually by laying off staff

Question 30

What is meant by “efficiency”?

Answer 30

Producing a level of output where average cost is minimised

Question 31

What is flow production?

Answer 31

Large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line

Question 32

What is meant by “job production”?

Answer 32

A method of production that involves employing all factors to complete one unit of output at a time

Question 33

What is a “kaizen”?

Answer 33

A Japanese term that means continuous improvement

Question 34

What is meant by “labour intensive”?

Answer 34

Production methods that make more use of labour relative to machinery

Question 35

What is labour productivity?

Answer 35

The amount of output each unit of labour (e.g one worker) produces

Question 36

What is meant by “lean production”?

Answer 36

An approach to operations that focuses on the reduction of resource use

Question 37

What is outsourcing?

Answer 37

Giving work to sub-contractors to reduce costs

Question 38

What is meant by “production”?

Answer 38

The transformation of resources into goods or services

Question 39

What is specialisation?

Answer 39

In business, the production of a limited range of goods

Question 40

What is standardisation?

Answer 40

using uniform resources and activities or producing a uniform product

Question 41

What is capacity utilisation?

Answer 41

The use that a business makes of its resources

Question 42

What is it meant by “excess” or “surplur capacity”?

Answer 42

When a business has too many resources, such as labour and capital, to produce its desired level of output

Question 43

What is full capacity?

Answer 43

The point where a business cannot produce any more capacity

Question 44

What does the term “mothballing” mean?

Answer 44

Leaving machines, equipment or building space unused, but maintained, so they could be brought back into use if necessary

Question 45

What is Over-utilisation?

Answer 45

The position where a business is running at full capacity and ‘straining’ resources

Question 46

What is rationalisation?

Answer 46

Reducing the number of resources, particular labour and capital, put into the production business process, usually undertaken because a business has excess capacity

Question 47

What is under-utilisation?

Answer 47

The position where a business is producing at less than full capacity

Question 48

What is meant by ‘buffer stocks’?

Answer 48

Stocks that are held as a precaution to cope with unforeseen demand

Question 49

What is ‘kanban’?

Answer 49

A card or an object that acts as a signal to move or provide resources in a factory

Question 50

What is meant by ‘lead time’?

Answer 50

The time between placing the order of stock and the delivery of goods

Question 51

What is a ‘re-order level’?

Answer 51

The level of current stock when new orders are placed

Question 52

What is a ‘re-order quantity’?

Answer 52

The amount of stock ordered when an order is placed

Question 53

What is ‘stock rotation’?

Answer 53

The flow of stock into and out of storage

Question 54

What is ‘work-in-progress’?

Answer 54

Partly finished goods