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Charlie wants to set up a chocolate factory. Organise the below costs in to fixed (indirect) and variable (direct) costs.
Raw materials Telephone Bill
Wages Rent
Electricity Bill Council Tax
= 5mins
UNIT TITLE: Unit 2:Finance for BusinessLESSON TITLE: BudgetsLEARNING AIM: B
COMPETENCY FOCUS:
Key Skills (L5): you will be able to develop your numeracy skills to calculate financial transactions of a business and to interpret financial data.
Learning ObjectivesBy the end of the lesson, you should be able to…
LO1) To describe what a budget is and why businesses use budgeting.
LO2) To explain the advantages and limitations of using budgets for planning.
LO3) To calculate variance to determine the accuracy of budgets.
Using the table below, complete a personal budget for yourself over the next 3 months.
(5mins)
Sept Oct Nov
Income
Allowance
TOTAL
Expenditure
Phone bill
Going out
Christmas Savings
TOTAL
Fantasy Football League
You have £40 million pounds to select your football ‘dream team’. You must not go over your budget.
Use the website http://fantasy.premierleague.com/player-list/
to get the names of your players, the position they play and their cost.
Once you have drawn on the following diagram the names and costs, you must then justify why you made the choices that you did and if you had to sacrifice any of your initial ideas.
Why budget?
Planning – anticipate problems and provide solutions early
Measure success and that objectives are being met
Motivation when come in under budget! Prevents overspending
Problems with setting budgets
Time-consuming therefore costly Planned figures therefore often inaccurate Conflict Changes in circumstances therefore
unreliable May de-motivate if budget is unrealistic
Variance Analysis
Stages in budgetary control
Preparation of plans (budgets)
Analysis of VariancesComparison of plans with actual results
Variance Analysis
Variance = Difference between the predicted and actual figure.- Can be ‘favourable’ (F) or ‘adverse’ (A)
Example:Forecast Actual Variance
Revenue 2,250 2,050 -200
Labour 500 412 -88
Materials 800 900 100
Transport 100 140 40
Profit 850 598 -252 (F)
Variance Analysis
Forecast Profit= 2,250 – 1,400 = 850
Actual Profit = 2,050 – 1,452 = 598
Profit Variance = £252 (F)
Task 3
Produce a factsheet/information leaflet for Business Link to hand out to new business
owners on the advantages of budgeting.
You must include:
What is a budget?Why is budgeting important? What are the advantages and disadvantages of
budgeting?5 Top Tips for budgeting your money
UNIT TITLE: Unit 2:Finance for BusinessLESSON TITLE: BudgetsLEARNING AIM: B
COMPETENCY FOCUS:
Key Skills (L5): you will be able to develop your numeracy skills to calculate financial transactions of a business and to interpret financial data.
Learning ObjectivesBy the end of the lesson, you should be able to…
LO1) To describe what a budget is and why businesses use budgeting.
LO2) To explain the advantages and limitations of using budgets for planning.
LO3) To calculate variance to determine the accuracy of budgets.