UNIT 2: USING BUDGETS

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CIMA Business Studies (Unit 2) Mind Map on UNIT 2: USING BUDGETS, created by Alessandra Genco on 05/06/2014.
Alessandra Genco
Mind Map by Alessandra Genco, updated more than 1 year ago
Alessandra Genco
Created by Alessandra Genco almost 11 years ago
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UNIT 2: USING BUDGETS
  1. BUDGETS are agreed plans of action over a given period of time, e.g. 12 months
    1. The benefits of using budgets are maximising revenue, control spending, ensure resources are used efficiently and efficient cash flow
      1. 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
      2. INCOME BUDGETS are planned targets for revenue in a given period of time
        1. EXPENDITURE BUDGET are planned targets for spending or costs for a business in a given period of time
          1. PROFIT BUDGETS are planned targets for profit in a given period of time
            1. VARIANCE is the difference between the budgeted and actual figures
              1. FAVOURABLE VARIANCES are variances that occur when actual figures are better than budgeted figures
                1. 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
                2. ADVERSE VARIANCES are variances that occur when actual figures are worse than budgeted
                  1. Some reasons for this could be that budgets have inaccurate figures, lower demand for than expected, machine faults, more overtime, increased cost of resources
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