Chapter 32 - Budgets

Question 1

Budgeting

Answer 1

Planning future activities (especially financial ones) by setting performance targets

Question 2

Budget Holder

Answer 2

The individual responsible for setting, managing and achieving a budget

Question 3

Variance Analysis

Answer 3

The process of calculating and comparing actual results to the budgeted figures and analysing the differences and their reasons

Question 4

Delegated Budgets

Answer 4

Budgets for which junior managers have been given authority/responsibility for setting and achieving

Question 5

Incremental Budgeting

Answer 5

A budgeting method that uses the previous year’s budget as a basis, with adjustments made for the coming year

Question 6

Zero Budgeting

Answer 6

A budgeting method where budgets are set to 0 each year, with budget holders having to justify their target levels to receive any finance

Question 7

Favourable Variance

Answer 7

A change from the budget that leads to higher than planned profits

Question 8

Adverse Variance

Answer 8

A change from the budget that leads to lower than planned profits

Question 9

Flexible Budgeting

Answer 9

A budgeting approach that allows adjustments in the cost of budgets if sales or output vary from the budgeted levels