Topic 3.9BM HL16 flashcards

Budgets (HL only)

SL HL

Practice Flashcards

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Card 1 of 163.9.1

Question

Variance = budgeted − actual. Favourable = ___. Adverse = ___

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All Flashcards in Topic 3.9

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3.9.116 cards

Card 1concept

Question

Variance = budgeted − actual. Favourable = ___. Adverse = ___

Answer

Better than expected; worse than expected.

💡 Hint

Better; worse

Card 2definition

Question

What is a variance?

Answer

Difference between budgeted and actual figures — favourable (better than expected) or adverse (worse).

💡 Hint

Budget vs actual

Card 3concept

Question

Six purposes of budgets? (PCCMCD)

Answer

Planning, Coordination, Control, Motivation, Communication, Decision-making.

💡 Hint

Plan, Coordinate, Control, Motivate, Communicate, Decide

Card 4concept

Question

Four limitations of budgets?

Answer

Based on estimates, can demotivate (unrealistic targets), inflexible, gaming (easy targets), time-consuming, quickly outdated.

💡 Hint

Estimates + demotivate + inflexible + gaming

Card 5definition

Question

What is a budget?

Answer

A financial plan setting expected income and expenditure over a period — usually one year. A target, not a record.

💡 Hint

Financial plan = target

Card 6concept

Question

Revenue vs costs variance rule is ___

Answer

Opposite! Higher revenue = fav, but higher costs = adverse.

💡 Hint

Opposite

Card 7concept

Question

Four types of budget?

Answer

Revenue budget, expenditure budget, profit budget, departmental budgets.

💡 Hint

Revenue, expenditure, profit, departmental

Card 8concept

Question

Budgets motivate staff by ___

Answer

Giving targets to aim for — but only if set at realistic levels.

💡 Hint

Realistic targets

Card 9concept

Question

Favourable variance: revenue ___ than budget OR costs ___ than budget

Answer

Higher; lower — both are good news.

💡 Hint

Revenue up OR costs down

Card 10concept

Question

'Gaming' in budgets means ___

Answer

Managers deliberately set easy targets to guarantee a favourable variance — undermines the process.

💡 Hint

Easy targets on purpose

Card 11concept

Question

Adverse variance: revenue ___ than budget OR costs ___ than budget

Answer

Lower; higher — both are bad news.

💡 Hint

Revenue down OR costs up

Card 12concept

Question

A budget is a PLAN, not ___

Answer

A record of what actually happened — actual results are compared to the budget to spot variances.

💡 Hint

Not actual results

Card 13concept

Question

Best businesses use ___ budgets that are updated as conditions change

Answer

Flexible — rather than rigidly sticking to a plan made months ago.

💡 Hint

Flexible

Card 14concept

Question

Budgets help coordination by ___

Answer

Ensuring all departments work toward the same financial goals.

💡 Hint

Aligned goals

Card 15example

Question

Budget sales $50k, actual $55k. Variance?

Answer

$5,000 favourable — actual revenue exceeded budget.

💡 Hint

$5k favourable

Card 16concept

Question

For REVENUE: actual > budget = ___. For COSTS: actual > budget = ___

Answer

Favourable; adverse. Don't mix them up!

💡 Hint

Fav; adverse

Topic 3.9 study notes

Full notes & explanations for Budgets (HL only)

BM exam skills

Paper structures, command terms & tips

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