2625861
Description
Mind Map by mikapolivotti, updated more than 1 year ago
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Created by mikapolivotti
about 9 years ago
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Budgets
- Budget: an agreed plan
establishing in numerical
or financial terms, the
policy to be pursued and
the anticipated outcomes
of that policy
- Provides Direction &
Coordination, Motivates Staff,
Improves Efficiency, and Assesses
the Forecasting Abilities
- Difficult of Monitor Fairly, Allocations may be Incorrect,
Saving may be sought that are not in the interests of the
firm (i.e. to keep within the budgets, a buyer may buy
cheaper materials and thus lower the quality of the
product), Changes may not be allowed for when the
budget is reviewed (i.e. External factors outside the
control of the org may affect budget holders' ability to
keep thier plan)
- Variance Analysis: the
process by which the
outcomes of budgets are
examined and then
compared w/ the budgeted
figs. The reasons for any
differences (variances) are
then found
- Favourable Variance: when costs are lower than
expected or revenue is higher than expected/
- Adverse Variance: when costs are higher than expected or
revenue is lower than expected
- Calculating Variances: Variance = Budget Figure - Actual Figure
- After calculating variances, the budgets holder will interpret their meaning.
- Adverse Variance may show
inefficiency where the business has
made mistakes. May also be due to
external influences such as changes in
the market, which made it more
difficult for a firm to meet its target
- Favourable Variances may show
efficiency, indicating that the business
has operated well. Also may show the
external influences such as the state
of the econ that made it easier for a
firm to meet its targets
- Adverse Variance may show
inefficiency where the business has
made mistakes. May also be due to
external influences such as changes in
the market, which made it more
difficult for a firm to meet its target
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