BTEC Level 3 Business

1
BTEC Level 3 Business

• Unit 2 Assignment 6- P6, M4, D3, D1.2

2
Budgeting

• What is the purpose of budgeting? Is it the same
  for individuals as it is for businesses?

3
Costs and Budgets

• A business needs to manage their costs if they
  want to make a successful profit. By not managing
  costs a business can loose control of what they
  are spending and make little or no profit.
• A business needs to
• Keep within a budget
• Increase income to cope with change
• Make sure working capital is available
• Set aside money in case of emergencies

4
Costs

• There are two main types of costs that need to be
  controlled
• Fixed Costs
• Variable Costs

5
Budgeting

• Budgeting can be difficult because it sets a
  guideline for how much a business thinks it will
  spend in the future.
• There are a two types of budgeting
• Zero Budgeting- No budget is given, each time a
  department wants to buy something they need
  management approval
• Allocated budgeting- money is allocated per
  department based upon numbers of employees/ size
  of department.

6
Variance Analysis

• The Variance is the difference between the budget
  and what is actually spent.
• If the result is better than expected it is known
  as favourable. E.g. Joe aims to spend 15 on a
  birthday present but actually spends 12, he has
  a favourable variance of 3.
• If the result is worse than expected it is known
  as adverse. E.g Joes present costs 17, he would
  have an adverse variance of 2.

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P6- Illustrate use of budgets as a means of
exercising financial control.

• Describe the following for Emma and Johns Hair
  salon.
• the purpose of budgeting
• the types of budget (e.g. sales budget, cashflow
  forecast)
• how budgets are set
• how a budget is monitored against actual
  performance
• the use of variance analysis
• Explain what their budget shows.

8
Break Even

• Explain the difference between fixed and variable
  costs.
• Explain the purpose of a break even chart/
  analysis.
• Explain the calculations used in break even
  charts.
• Research the benefits and limitations of break
  even
• Produce a break even chart for Headliners Hair
  Salon using their data.

9
M4- Analyse why costs and budgets need to be
controlled.

• Analyse the reasons why costs and budgets need to
  be controlled. (M4)

10
D3

• Define what variances are (favourable and
  adverse)(see this). Examine the problems of not
  monitoring a business budget and state why
  budgets need to be managed properly. (D3)
• Think about the different aspects of the business
  and consider how they would each be affected if
  costs were out of control. Consider
• Employees
• Suppliers
• Stock
• Profit Levels
• Customer Service

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D3 Resources

• http//www.businessknowledgesource.com/smallbusine
  ss/how_to_recognize_potential_budgeting_problems_0
  24003.html

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D1 Part 2

• To complete D1 you need to evaluate how managing
  costs and budgets can help a business to be more
  successful.
• Think about the following areas
• increases in sales
• increases in profit
• increase in the customer base
• increases in levels of customer satisfaction
• increases in levels of employee satisfaction
• reductions in labour turnover
• increased efficiency in production/service
  provision