3.9 Budgets

Question 1

Functions of budgets

Answer 1

• planning
• coordinating
• control
• motivation
• communication

Question 2

Cost centres

Answer 2

A section of a business, such as a department, to which costs can be allocated or charged.

Question 3

Profit centres

Answer 3

A section of a business to which both costs and revenues can be allocated.

Question 4

Variance analysis can be:

Answer 4

• adverse/unfavourable
• favourable
• positive
• negative

Question 5

Adverse variances

Answer 5

Unfavourable to the firm.

Question 6

Favourable variances

Answer 6

Beneficial to the business.

Question 7

Positive variance

Answer 7

Occurs where ‘actual’ exceeds ‘planned’ or ‘budgeted’ value.

Question 8

Negative variance

Answer 8

Occurs where ‘actual’ is less than ‘planned’ or ‘budgeted’ value.

Question 9

Variance

Answer 9

Actual outcome - Budgeted outcome