What is a plan and what is a budget?
A plan sets out an organisation’s strategies to achieve identified goals. Plans are long term.
A budget is a formalised plan for future activities of an organisation. Budgets are short term.
What is the purpose of budgeting?
A budget is a tool which allows managers to plan their operations and then control those operations by comparing actual results against budgeted results.
List five benefits of budgeting.
- Planning
- Communication and co-ordination
- Authorisation
- Monitoring and control
- Motivation
What are the seven stages of the planning and control cycle?
- Identify organisational objectives
- Identify alternative strategies which will help achieve organisational objectives
- Evaluate each alternative strategy
- Choose which courses of action to follow
- Implement the long-term plan by preparing budgets
- Measure actual results and compare with the budget
- Respond to divergences from budget
What are capital budgets?
These budgets plan for the acquisition of capital items such as buildings, vehicles or machinery.
What are revenue budgets?
These budgets plan for the amount of income generated from sales of products and services. These tend to be short term.
What are resource budgets?
These budgets are short term and are concerned with the day-to-day operations of the business. There are different types of resource budgets:
- production budget
- materials usage budget
- materials purchases budget
- labour usage budget
- labour cost budget
- machine hours budget
- variable overheads budget
- fixed overheads budget
What is key budget factor?
This is the element or resource of the organisation that is likely to limit the activities of the organisation.
List the five stages of the product life cycle.
- Development
- Launch
- Growth
- Maturity
- Decline
What is PEST?
PEST analysis looks at the four different factors that could affect demand for the product.
Political
Economic
Social
Technological
