budgeting

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budget
a finacial plan to move towards the achievement of set objectives
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historical budget
departmental budgets drawn up by using past data, is quicker but doesnt encourage efficiency
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zero based budget
the budget is set at zero so departments have to justify why they need money, savings can be made nut it takes more time
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types of budget
1.sales budget 2.production budget 3.purchases budget 4.labour budget 5.capital expenditure 6.cash budget 7.master budget
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varience analysis
varience= actual level-budgeted level
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favourable
the actual figure is better than planned, this should give the firm greater profits
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adverse
the actual figure is worse than planned, this would give the firm lower profits
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what causes favourable variance
wage rises lower than expected,extra sale, raw materials cheaper
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what causes adverse variance
competition, government increase rates, fuel prices increase
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adavntages
departmental co-operation, everyone is aware of costs, everyone can focus on objectives
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disadvantages
inaccurate and unrealistic can be ignored, may resrict business activity, can be difficult and time consuming
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Other cards in this set

Card 2

Front

departmental budgets drawn up by using past data, is quicker but doesnt encourage efficiency

Back

historical budget

Card 3

Front

the budget is set at zero so departments have to justify why they need money, savings can be made nut it takes more time

Back

Preview of the back of card 3

Card 4

Front

1.sales budget 2.production budget 3.purchases budget 4.labour budget 5.capital expenditure 6.cash budget 7.master budget

Back

Preview of the back of card 4

Card 5

Front

varience= actual level-budgeted level

Back

Preview of the back of card 5
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