Micro Variables
It is call the costs that change depending on the level of production
What is variable cost?
Economic factor that measures the general increase in prices over time
What is inflation?
First step in the budget cycle
What is planning
Projects future sales volume and revenue, often forming the basis for other budgets
What is sales budget?
Budget that covers less than one year, usually monthly or quarterly
What is short term budget?
In a sales budget, this factor is most directly linked to projected revenues
What is sales volume?
Macro variable that affects the cost of borrowing money
What is interest rate?
After execution, this stage of the budget cycle measures whether goals were achieved
What is evaluation/ control
Allocates resources for activities that indirectly assist production, such as maintenance and quality control
What is production budget?
Typical time horizon of a long-term budget
What is over 3-5 years?
This micro variable represents the expenses a company must pay regardless of production
What is Fixed Costs
Macro variable that would impacting the budget if the peso depreciates against the dollar
What is exchange rate?
Main stage that ensures spending stays within approved limits and objectives are being met
What is Monitor and Control?
Type of budget adjusts based on actual activity levels rather than staying fixed
What is flexible budget?
Budget scope most useful for daily operations, like cash flow
What is short term budget?
One of these efers to a mico variable:
Increase advertising spending by 15%.
Inlation rate cost rise by 5%
Tax expenses cost reduce by 6%
What is an increase in adcertising by 15%?
Economic measurment that it indicates the overall level of economic activity. affecting demand of goods and services
What is GDP?
Budget stage that helps detect deviations and make corrective adjustments
What is feedback?
Type of budget that spans from one to three years
What is medium term budget?
Main reason a company choose a rolling (flexible) budget instead of a fixed annual budget
What is allowing continuous updating and adapting to changing conditions?
Example of how a micro variable could directly affect the accuracy of a company’s budget.
If raw material prices rise unexpectedly, production costs increase, reducing projected net cash inflows.
A company exports 60% of its sales. Explain how changes in both exchange rates and foreign demand could simultaneously affect its budget
weaker domestic currency increases export revenues
a slowdown in foreign demand could offset gains
Explain how the evaluation stage of one budget cycle becomes the foundation for the planning stage of the next cycle.
Results from evaluation identify successes and failures, providing data to improve assumptions and resource allocation in the next planning process.
A company creates a budget for each department and then combines them into a single plan. Explain why the master budget is considered both a financial and a strategic tool
Because it not only consolidates all operations financially but also aligns departmental objectives with the company’s overall strategic goals
ompare the advantages and disadvantages of using short-term vs. long-term budget scopes in an unstable economic environment.
Short-term budgets are more flexible and adaptable but may lack strategic vision, while long-term budgets provide direction but can become unrealistic if economic conditions change rapidly