IB Budget Variances

What is the purpose of budgeting in IB business management?

• To increase expenses and reduce profits

• To create financial instability

• To plan, control, and evaluate performance

• To make it difficult to track performance

Explain the concept of budget variance in IB business management.

• Budget variance is the difference between the budgeted amount and the actual amount spent or earned.

• Budget variance is the difference between the budgeted amount and the forecasted amount.

• Budget variance is the difference between the budgeted amount and the amount earned from sales.

• Budget variance is the difference between the budgeted amount and the amount spent on marketing.

How can a favorable budget variance be interpreted in IB business management?

• A favorable budget variance indicates a negative outcome in IB business management.

• A favorable budget variance indicates a positive outcome in IB business management.

• A favorable budget variance indicates a neutral outcome in IB business management.

• A favorable budget variance has no impact on IB business management.

What are the potential causes of unfavorable budget variances?

• Inaccurate budgeting, unexpected changes in market conditions, inefficient operations, or inaccurate forecasting

• Inaccurate budgeting, expected changes in market conditions, efficient operations, and accurate forecasting

• Accurate budgeting, expected changes in market conditions, efficient operations, and accurate forecasting

• Accurate budgeting, unexpected changes in market conditions, efficient operations, and accurate forecasting

Explain the role of management in addressing budget variances.

• Management is responsible for identifying the causes of budget variances, making necessary adjustments, and implementing corrective actions to ensure financial goals are met.

• Management has no role in addressing budget variances

• Budget variances are not important for management to address

• Management should ignore budget variances and focus on other areas

What are the limitations of using budget variances as a performance measurement tool?

• Budget variances are not relevant to performance evaluation.

• Budget variances may not provide a complete picture of performance.

• Budget variances are too complex to be useful as a performance measurement tool.

• Budget variances always provide an accurate reflection of performance.

How can companies use budget variances to improve future budgeting processes?

• By blaming the employees for the budget variances

• By ignoring the variances and keeping the budget the same

• By increasing the budget without any analysis

• By identifying areas of overspending or underspending, analyzing the reasons behind the variances, and adjusting future budgets accordingly.

Which represents the correct answers to the chart above?

• 1) Adverse 2) 100 3) Favorable 4) 100,000 5) Adverse

• 1) Favorable 2) 100 3) Adverse 4) 120,000 5) Adverse

• 1) Favorable 2) 80 3) Adverse 4) 120,000 5) Favorable

• 1) Adverse 2) 100 3) Adverse 4) 120,000 5) Favorable

The difference between the predicted and actual budgeted figures is known as:

• Variance

• Adverse variance

• Profit

• Favorable variance

Favorable variances are those that

• are positive

• lead to lower than expected profit

• lead to higher than expected profit

• are unexpected