3.9 - Budgets

Question 1

Define cost center

Answer 1

Unit is a business to which cost can be allocated for accounting purpose

Question 2

Define profit center

Answer 2

A unit of a business to which cost and profits can be allocated for accounting purposes;
By function, product, store, region, office

Question 3

What is the purpose of a budget

Answer 3

To see how efficiently costs are minimised and profits are maximised in diffferent parts of a business

Question 4

Why are cost and profit centers goood

Answer 4

• efficiently monitoring
• design making and planning
• motivator
• new perspectives

Question 5

Why are cost and profit centers bad

Answer 5

• stress
• qualitative factos ignored
• interdependence and coordination are at risk
• not always feasible

Question 6

Define budget

Answer 6

A financial plan of estimated revenues and expenditures for a future time period

Question 7

Define budget holder

Answer 7

Person or group of people who formulate budgets and are in charge of their achievements

Question 8

What are some examples of types of budgets

Answer 8

Master, marketing, staff, sales, production

Question 9

Define variance

Answer 9

Discrepancy between actual budgeted outcomes

Question 10

What are the three columns in a budget

Answer 10

Budgeted figures, actual figures, variance

Question 11

What are the three groups in a budget

Answer 11

Income
Expenses
Net income

Question 12

What are the positives of a budget

Answer 12

• control
• coordination
• planning
• motivation
• allows them to stay focused

Question 13

What are the negatives of a budget

Answer 13

• source of conflict
• unnecessary shortcuts
  Decreased quality
  Bias & underestimates