• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Budgets - An explanation of the use of budgets as a means of exercising financial control in Name It Ltd

Extracts from this document...


Budgets An explanation of the use of budgets as a means of exercising financial control in 'Name It Ltd' Types Of Cost: Fixed Costs Fixed costs are costs that the business have to pay that don't change over a short period of time. As the product sale or service increases the costs stay the same. The same amount is paid regardless of the level of production. Fixed costs can include: the rent charge, electricity bills, gas bills, telephone bills, advertising costs or insurance prices. Variable Costs Variable costs are costs that they business have to pay but it is possible that they will change as the output increases. Variable costs can include: raw materials, delivery costs or packaging costs. Break-Even: Businesses should aim to break even to ensure they are going to survive in the future. ...read more.


'Name It Ltd' use budgets for several reasons, these reasons include: � 'Name It Ltd' will have enough money to buy in enough supplies for their sales because they would've been tracking their money income and outcome. � Suppliers give discounts when a business pay them on time, having a budget will allow 'Name It Ltd' to be able to afford to pay straight away. Paying on time also helps 'Name It Ltd' to avoid paying interest, getting a bad credit rating and possible bankruptcy. � They will be able to save money for the use of retained profit if they have a bad month. They will also be able to save money for contingencies. � They will have enough money to make investments if that is what they need to do. ...read more.


'Name It Ltd' have variances in their budgets. I will give some examples. 'Name It Ltd' put a budget on their raw materials as �34,600 however they ended up spending �42,000 on their raw materials for 2010. This gives them the variance of �7,400 which shows that the business did not stick to their budget as they exceeded it. They put a budget of �1,300 on their electricity but actually ended up spending �2,000 in 2010 this means their variance was �700 which also shows that 'Name It Ltd' has not stuck to their budget, this means they could face possible bankruptcy. 'Name It Ltd' put a budget of �12,000 on their rent for 2010, they ended up spending �12,000 which meets their budget without going over it. This is what the business should be aiming for in order to control their costs and reduce the risk of their business failing. ?? ?? ?? ?? 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Marked by a teacher

    In this assignment I will talk about why costs and budgets need to be ...

    3 star(s)

    If a business doesn't control its costs and budget properly then it wouldn't manage to assess and evaluate its finances. Also if a business doesn't manage or control their budget then it would find it difficult to reach its objectives and targets.

  2. A2 Business CourseWork

    * Renewable energy sources: Tesco say that one way of reducing their carbon output is to generate their own energy from renewable, sustainable sources such as solar, wind, biomass and geothermal. They have decided to set aside �500 million to invest in these technologies over the next 5 years.

  1. Sources Of Finance

    To enable the sole trader to start selling and earning profit, which will cover them in the long term as this is what the owner is in business for (Provide goods/services and to make a profit).

  2. In this assignment I will be explaining in detail the importance of cash flow, ...

    Corporations that offer shares for sale to the public are usually required by law to report revenue based on generally accepted accounting principles or International Financial Reporting Standards. Breakeven In relation to Cadbury Schweppes, breakeven is when all costs and exp nses are equal.

  1. Break Even

    1,000 �18,000.00 �10,000.00 �28,000.00 �15,000.00 -�13,000.00 5,000 �18,000.00 �50,000.00 �68,000.00 �75,000.00 �7,000.00 5,500 �18,000.00 �55,000.00 �73,000.00 �82,500.00 �9,500.00 10,000 �18,000.00 �100,000.00 �118,000.00 �150,000.00 �32,000.00 10,500 �18,000.00 �105,000.00 �123,000.00 �157,500.00 �34,500.00 11,000 �18,000.00 �110,000.00 �128,000.00 �165,000.00 �37,000.00 11,500 �18,000.00 �115,000.00 �133,000.00 �172,500.00 �39,500.00 12,000 �18,000.00 �120,000.00 �138,000.00 �180,000.00 �42,000.00 12,500 �18,000.00

  2. The company I'm reporting on is Kraft Foods Incorporated - accounting principles.

    The units-of-activity method is expressed in terms of the total units of production or expected use from an asset, rather than a time period. This method has the potential to yield the lowest deprecation expense, but if that's the case, then you will at some point in the life of the asset pay the highest (or really high)

  1. Financial forecasting for business, Start up costs, running costs, variable and fixed costs

    on Overdue Accounts Internet Accounts costs Web-site Storage costs Bank Charges Service Charges Depreciation Expense - Equipment Depreciation Expense- Furniture Other Expenses... 3. Cost behaviour When the way a specific cost reacts to changes in activity levels is called cost behaviour.

  2. Costs and Budgets of Headliners Hair Salon

    Surplus is a positive budget. In order to complete a break-even analysis we need to know all this data (Fixed Costs, Variable Costs, Sales Revenue). After completing this analysis we can easily state whether the business managed to get a profit or a loss. To break-even Headliners Hair Salon have to sale 1,667 units where all costs are going to be covered.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work