BUDGETS are agreed
plans of action over a
given period of time, e.g.
12 months
The benefits of using budgets
are maximising revenue,
control spending, ensure
resources are used efficiently
and efficient cash flow
The disadvantages of using budgets
are that it can lead to unrealistic
targets and the external and
uncontrollable factors can affect the
accuracy of the budgeted figures
INCOME BUDGETS
are planned targets for
revenue in a given
period of time
EXPENDITURE BUDGET are
planned targets for spending
or costs for a business in a
given period of time
PROFIT BUDGETS are
planned targets for profit in a
given period of time
VARIANCE is the
difference between the
budgeted and actual figures
FAVOURABLE
VARIANCES are variances
that occur when actual
figures are better than
budgeted figures
Some reasons for this could be that
inaccurate budgeted figures, higher
demand than expected, fewer
machine breakdowns, improvements
in the motivation of staff and
reduced cost of materials
ADVERSE
VARIANCES are
variances that
occur when actual
figures are worse
than budgeted
Some reasons for this could be that
budgets have inaccurate figures,
lower demand for than expected,
machine faults, more overtime,
increased cost of resources