LU10 + LU11 - LU11: Operational Budgeting & Revenue Variance Analysis

3 important questions on LU10 + LU11 - LU11: Operational Budgeting & Revenue Variance Analysis

Reasons for budgeting planning?

  1. Forces managers to look forward and anticipate the future
  2. Examining, comparing, and selecting alternative courses of action
  3. Enables the setting of prices that deliver required income levels
  4. Enables control
  5. Motivation
  6. Communication

What are the steps in the process of budgeting?

  1. Financial objectives (maximizing long term profits)
  2. Revenue forecasts
  3. Expenses forecasts
  4. Net Income forecast

Companies with a low operating leverage

  • Lower Risk
  • Low CMR
  • Have a low level of fixed cost relative to the variable costs

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