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.