Budgeting

Beschreibung

AS - Level Business Studies (Theme 2) Karteikarten am Budgeting, erstellt von Charlotte Summerly am 07/03/2016.
Charlotte Summerly
Karteikarten von Charlotte Summerly, aktualisiert more than 1 year ago
Charlotte Summerly
Erstellt von Charlotte Summerly vor mehr als 8 Jahre
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Zusammenfassung der Ressource

Frage Antworten
What is budgeting? A financial plan for the future concerning the revenue and costs of a business Allocating finance to a particular project/task
Purpose of budgeting - ensuring a business does not overspend - costs don't go out of control - make efficient plans
Sales volume budgets based on planned sales
Production cost budget planned production costs
Sales revenue budget considers sales figures
Expenditure budgets Considers total costs
Profit budgets Considers expected profits
Flexible budgets changing business conditions
Operating budgets daily operations in the business
How to decide on a budget - objectives - competitor spending - sales revenue
Historical budgeting - previous figures to make future plans - consider factors such as inflation, trends and future events
Zero-based budgeting - no budget is allocated - spending with caution - show benefits of spending certain amounts of money - help to minimise un-necessary purchases - try and minimise opportunity costs
Benefits of zero based budgeting - can always be efficient in decision making - allocation of resources could be improved - more for their money - more likely to evaluate amount of money being spent
Limitations of zero based budgeting - time consuming - may not have a good initiative - could overspend if responsibility is given to wrong person - decisions can be influenced by opinions
Benefits of budgeting - indicates priorities - provides direction - assigns responsibility - improve efficiency
Limitations of budgeting - external factors such as changes in organisations - poor communication - changes may not be allowed in the budget which could cause conflict - only think about short term instead of both
What is variance analysis? It represents the difference between the budget and the actual performance/spending
Variance formula budget figure - actual spending
Favourable variances - exists when actual figures are less than planned and are gaining profits E.G - wages less than budgeted, fuels costs are less
Adverse variances - when actual figures are more than planned and are gaining a loss EG - raw materials are more, overheads are more
What are the causes of favourable variances? - wages rise lower than expected - economic boom leads to higher sales - imported goods are cheaper
What are the causes of adverse variances? - competitors gain more sales - government increases business rates - fuel prices increases
External factors - competitor behaviour affects demand - change in economy - cost of raw materials increase
Internal factors - improving efficiency - overestimating - changes in prices
How is variance analysis used? - to plan ahead - re-motivate staff - change marketing mix - change product - lower sales price - find cheaper suppliers
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