It is a financial plan for expected revenue and expenditure for an organization or a department within an organization, for a given period of time.

Budgets can also be stated in terms of financial targets such as planned sales revenues, costs, cash flows or profits

Sales budgets: The focus is on forecasting how many products a business aims to sell over the next year and the likely revenue to be received from the sales

Staffing budget: This plan translates the mnetary costs of staff that are required for the organization for the next twelve months

Production budget: This is the plan for the level of output over the next year

Marketing budget: This refers to the forecast of how business inteds to achieve its bidgeted sales through marketing activities

Available finance: Historical data: what was happened in the

past Organizational objectives: if a business is

planning external growth, then budgets will need to be raises

Benchmarking: This mean setting a firm’s budget based on the budgets of its competitors

As with all forms of Quantitative forecast, there are likely to be unforeseen changes that can cause large differences between the budgeted figure and the actual outcome.

The difference between the budgeted figure and the actual outcome, this is known as the variance

Favourable variances: It exists when the discrepancy is financially beneficialto the organization. Ex: The actual marketing costs were valued at $220,000 but the budgeted value was $250,000, so the firm has a favorable variance of $30,000

Unfavourable variances: It is also known as an adverse variance. It occurs when actual costs are higher that expected.

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