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3.9: Budgeting (Key Features of Budgeting (budget ≠ forecast, outcome has…
3.9: Budgeting
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Variance Analysis
variance analysis: the process of investigating any differences between budgeted figures and actual figures
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favourable variance: exists when the difference between the budgeted and actual figures leads to a higher than expected profit
adverse variance: exists when the difference between the budgeted and actual figures leads to a lower than expected profit
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Preparation of Budgeting
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Setting Budget Levels
incremental budgeting: uses last year’s budget as a basis and an adjustment is made for the coming year
zero budgeting: setting budgets to zero each year and budget holders have to argue their case to receive any finance
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