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Erstellt von Charlotte Summerly
vor mehr als 8 Jahre
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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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