Advanced Budgeting Concepts

Advanced Budgeting Concepts FAQ

1. What is continuous budgeting?

A system of updating the budget continuously, often on a monthly or quarterly basis.

2. What is driver-based budgeting?

A budgeting method that focuses on key drivers of financial performance rather than historical data.

3. How does activity-based costing improve budgeting?

By assigning costs more accurately based on the activities that generate those costs, leading to better budgeting.

4. What is participative budgeting?

A budgeting process where employees at all levels are involved in setting the budget.

5. What is Kaizen budgeting?

A budget that incorporates continuous improvement, setting targets based on incremental performance improvements.

6. What is a bottom-up budget?

A budgeting process where individual departments create their own budgets, which are then combined into the company’s overall budget.

7. How is benchmarking used in budgeting?

It compares a company’s budget and performance with competitors or industry standards to identify areas for improvement.

8. What is the envelope method in personal budgeting?

A technique where funds are allocated to different categories and placed in separate envelopes to control spending.

9. How is a forecast error calculated?

By taking the difference between the forecasted and actual outcomes, often measured as a percentage.

10. What is zero-variance budgeting?

A highly controlled budgeting approach where there is minimal or no difference between budgeted and actual results.

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