Chapter 6

Chapter 6

What information does the manager need?
1. Managers are involved in:
  1. Planning what the business does.
  2. Making decisions.
  3. Controlling business activity.
2. Managers will be interested in financial information for:
  1. Income.
  2. Costs.
Budgets.
1. What is a budget?
  1. A budget is a financial plan for an organisation that is prepared in advance.
2. What is the purpose of a budget?
  1. The budget creates plans.
  2. The budget communicates and coordinates the plans.
  3. The budget can be used to monitor and control.
3. Standard costs.
  1. Expected costs that have been calculated in advance.
4. Variances.
  1. The difference between the budget figures and the actual figures.
  2. Variances can be either:
    1. Adverse
      1. Where the actual cost is greater than the budgeted cost.
    2. Favourable
      1. Where the actual cost is less than the budgeted cost.
  3. Budgeted cost - Actual cost
  4. Significant variances:
    1. A variance that is brought to the managers attention for further investigation.
Reporting to mangers.
1. Income.
  1. Sales manager.
2. Materials.
  1. Production manager.
  2. Purchasing manager.
3. Labour.
  1. Production manger.
  2. Human resources manager.
4. Expenses.
  1. Administration manager.
5. Production overheads.
  1. Production manager.
6. Administration overheads.
  1. Administration manager.
7. Selling and distribution overheads.
  1. Sales manager.
  2. Distribution/Transport manager
8. Financial overheads.
  1. Finance manager.
  2. Company accountant.

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