Unit 2. Business Resources. Assignment 4
Africa Alive, the role of financial resources
P6
Africa Alive’s Budget
Cost centre 2016 2016 2016 2017 2017 2017 2018 2018 2018
Budget Actual Variance Budget Actual Variance Budget Actual Variance
Animal welfare 500 489 11 515 480 35 530 476 54
Personnel (HR) 300 299 1 309 310 -1 318 318 0
Marketing 100 55 45 103 38 65 106 66 40
Product 40 50 -10 41 55 -14 42 34 8
development
Equipment 100 10 90 103 150 -47 106 12 94
Administration 80 60 20 82 76 6 85 85 0
Total 1,120 963 157 1,153 1,109 44 1,187 991 196
Budgets
Budgets are the main way of managing expenditure within a business. A budget is an estimation
of revenue and expenses over a specified future period of time; it is compiled and re-evaluated on a periodic
basis. Once created, budgets have to be managed to make sure they are effective, which should include:
allocating responsibility for different parts of the budget to particular staff within the business, recording all
spending as it happens and comparing actual spending with the budget on a regular basis or taking action if
actual spending is higher or lower than expected. Some businesses manage their budgets very carefully, not
allowing any deviation from the budgeted spending and even want the different areas to reach their budget
even if they would normally be under it, whilst others are more flexible and allow employees to use their
initiative to assess whether it is essential that they potentially go above the budget.
Africa Alive’s budget is separated into different areas, this is so they can allocate a budget to each specific area
and they can then see which areas have high or low variance so they can adjust the budget accordingly. Africa
Alive’s budget is split into Animal welfare, Personal (HR), Marketing, Product development, Equipment and
administration. These areas then have the budget set at the start of the year and then the actual amount of
money they spent at the end of the year recorded on this chart. They also record the variance which is the
amount that the actual is different from the budget each year.
Budgets are usually planned well in advance of the start of the business year and different businesses use
different methods:
Incremental Budgeting
An incremental budget is a budget prepared using a previous period's budget or actual performance as a basis
with incremental amounts added for the new budget period.
Zero-based Budgeting
Zero-based budgeting is a method of budgeting in which all expenses must be justified for each new period.
The process of zero-based budgeting starts from a "zero base," and every function within an organization is
analysed for its needs and costs.
Activity-based Budgeting
Activity-based budgeting is recording, researching, and analysing activities that lead to costs for a business. For
example, if the business wants to produce 200,000 items, the exact production costs will be added to the
budget.
Africa Alive, the role of financial resources
P6
Africa Alive’s Budget
Cost centre 2016 2016 2016 2017 2017 2017 2018 2018 2018
Budget Actual Variance Budget Actual Variance Budget Actual Variance
Animal welfare 500 489 11 515 480 35 530 476 54
Personnel (HR) 300 299 1 309 310 -1 318 318 0
Marketing 100 55 45 103 38 65 106 66 40
Product 40 50 -10 41 55 -14 42 34 8
development
Equipment 100 10 90 103 150 -47 106 12 94
Administration 80 60 20 82 76 6 85 85 0
Total 1,120 963 157 1,153 1,109 44 1,187 991 196
Budgets
Budgets are the main way of managing expenditure within a business. A budget is an estimation
of revenue and expenses over a specified future period of time; it is compiled and re-evaluated on a periodic
basis. Once created, budgets have to be managed to make sure they are effective, which should include:
allocating responsibility for different parts of the budget to particular staff within the business, recording all
spending as it happens and comparing actual spending with the budget on a regular basis or taking action if
actual spending is higher or lower than expected. Some businesses manage their budgets very carefully, not
allowing any deviation from the budgeted spending and even want the different areas to reach their budget
even if they would normally be under it, whilst others are more flexible and allow employees to use their
initiative to assess whether it is essential that they potentially go above the budget.
Africa Alive’s budget is separated into different areas, this is so they can allocate a budget to each specific area
and they can then see which areas have high or low variance so they can adjust the budget accordingly. Africa
Alive’s budget is split into Animal welfare, Personal (HR), Marketing, Product development, Equipment and
administration. These areas then have the budget set at the start of the year and then the actual amount of
money they spent at the end of the year recorded on this chart. They also record the variance which is the
amount that the actual is different from the budget each year.
Budgets are usually planned well in advance of the start of the business year and different businesses use
different methods:
Incremental Budgeting
An incremental budget is a budget prepared using a previous period's budget or actual performance as a basis
with incremental amounts added for the new budget period.
Zero-based Budgeting
Zero-based budgeting is a method of budgeting in which all expenses must be justified for each new period.
The process of zero-based budgeting starts from a "zero base," and every function within an organization is
analysed for its needs and costs.
Activity-based Budgeting
Activity-based budgeting is recording, researching, and analysing activities that lead to costs for a business. For
example, if the business wants to produce 200,000 items, the exact production costs will be added to the
budget.
