Financial Control

Created by: chrissieko
Created on: 01-12-22 12:26

Profiling of Budgets

Indicates how total annual budgets will be split across the months to show the timing of the budget spending over the year.
Advantages - profiles are based on known patterns of expenditure and income. allows for income and expenditure fluctuations, encour

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Fixed Budget

Prepared based on estimation of production and sales volume.

Are static

Actual performance is compared against the budget which was based on a different activity level.

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Flexible Budget

Recognises different cost behaviour patterns.

Used for performance monitoring and control.

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Uses of Planning and Operational variance

If planning errors occur due to unforeseen events, they are not under management control and should be excluded from a budget/actual comparison.

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Problems of planning and operation variances 1

Interdependencies - difficult to decide what the ex-post standard should be and to assess possible interdependencies which may arise

Interpretation - interpretation of planning variances may cause confusion

Cost - it's more costly compared to other sys

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Problems of planning and operation variances 2

Setting the standard - who sets the ex-post standard? if it is the manager with budget responsibility, they could maximise

Redundancy - planning variances may be redundant, through investigation it reveals factors that are not competitive

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Other cards in this set

Card 2

Front

Fixed Budget

Back

Prepared based on estimation of production and sales volume.

Are static

Actual performance is compared against the budget which was based on a different activity level.

Card 3

Front

Flexible Budget

Back

Card 4

Front

Uses of Planning and Operational variance

Back

Card 5

Front

Problems of planning and operation variances 1

Back

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Financial Control