Edexcel Business A Level Revision

Variance analysis - Calculating and investigating the difference between actual results and the budget. Variance - arises when there is a difference between actual and budget figures. Management by exception - the process of focusing on activities that require attention and ignoring those that appear to be running smoothly Variances can be either: Positive/favourable (better than expected) Adverse/unfavourable ( worse than expected) A favourable variance might mean that: Expenditure was lower than expected in the budget Profits were higher than expected Income was higher than expected By contrast, an adverse variance might arise because: Expenditure was higher than expected in the budget Profits were lower than expected Income was lower than expected Looking at the sales revenue section, you can see that actual sales of standard product were £15k higher than budget – this is a positive (favourable) variance. Turning to the costs section, act...

Budgets - are forecasts or plans for the future finances of a business. It sets out targets to be met, the costs of achieving them and how that spending might be financed. Income budget - A target set for the amount of revenue to be achieved in a set period of time. Expenditure budget -  A limit placed on the amount to be spent in a given period of time Profit budget -  A target set for the surplus between income and expenditure in a given period of time Budgets can be: Income Expenditure Profit (Income - Expenditure) The purpose of setting budgets... Provides a quantifiable target, that can be communicated to interested parties, against which actual outcomes can be measured. For example, are sales targets being achieved? Are managers keeping expenditure under control? Is the business operating efficiently to achieve profit targets?  Helps with planning and forecasting to inform decision making. For example, what are this years' priorities? Where were b...