Topic 33&34: Budgets + Profit

Question 1

Purpose of budgets

Answer 1

. Control and monitoring
. Planning
. Coordination
. Communication
. Efficiency
. Motivation

Question 2

Types of budgets

Answer 2

1. Sales budget
2. Production cost budget
3. Zero based budget -> advantages and disadvantages

Question 3

Using budgets -> budgetary control

Answer 3

. Preparation of plans
. Comparisons of plans with actual results
. Analysis of variances

Question 4

Types of variance

Answer 4

1. Adverse: figures worst than budgeted VS favourable: figures better than budgeted
2. Profit variance
   -> variances useful for decisions making

Question 5

Difficulties of budgeting

Answer 5

1.setting budgets
2. Motivation
3. Manipulation
4. Rigidity
5. Short-term

Question 6

Types of profit

Answer 6

1. Gross profit
2. Operating profit
3. Profit of the Year