1. Re-cap Charlie wants to set up a chocolate factory. Organise the below costs in to fixed (indirect) and variable (direct) costs. Raw materialsTelephone Bill WagesRent Electricity BillCouncil Tax = 5mins

2. UNIT TITLE:Unit 2:Finance for Business LESSON TITLE:Budgets LEARNING AIM: B COMPETENCY FOCUS: Key Skills (L5): you will be able to develop your numeracy skills to calculate financial transactions of a business and to interpret financial data. Learning Objectives By the end of the lesson, you should be able to… LO1) To describe what a budget is and why businesses use budgeting. LO2) To explain the advantages and limitations of using budgets for planning. LO3) To calculate variance to determine the accuracy of budgets.

3. Key Terms BudgetVarianceExpenditureIncome ForecastFavourableAdverse

4. Using the table below, complete a personal budget for yourself over the next 3 months. (5mins) SeptOctNov Income Allowance TOTAL Expenditure Phone bill Going out Christmas Savings TOTAL

5. Fantasy Football League You have £40 million pounds to select your football ‘dream team’. You must not go over your budget. Use the website http://fantasy.premierleague.com/player-list/ http://fantasy.premierleague.com/player-list/ to get the names of your players, the position they play and their cost. Once you have drawn on the following diagram the names and costs, you must then justify why you made the choices that you did and if you had to sacrifice any of your initial ideas.

7. Why budget?  Planning – anticipate problems and provide solutions early  Measure success and that objectives are being met  Motivation when come in under budget!  Prevents overspending

8. Problems with setting budgets  Time-consuming therefore costly  Planned figures therefore often inaccurate  Conflict  Changes in circumstances therefore unreliable  May de-motivate if budget is unrealistic

9. Case Study Task Complete case study task ‘why do businesses budget?’

10. Variance Analysis Stages in budgetary control Preparation of plans (budgets) Analysis of Variances Comparison of plans with actual results

11. Variance Analysis Variance = Difference between the predicted and actual figure. -Can be ‘favourable’ (F) or ‘adverse’ (A) Example: ForecastActualVariance Revenue2,2502,050-200 Labour500412-88 Materials800900100 Transport10014040 Profit850598-252 (F)

12. Variance Analysis Forecast Profit= 2,250 – 1,400 = 850 Actual Profit = 2,050 – 1,452 = 598 Profit Variance = £252 (F)

13. Task 2 Variance Analysis Task

14. Task 3 Produce a factsheet/information leaflet for Business Link to hand out to new business owners on the advantages of budgeting. You must include:  What is a budget?  Why is budgeting important?  What are the advantages and disadvantages of budgeting?  5 Top Tips for budgeting your money

15. Key Terms BudgetVarianceExpenditureIncome ForecastFavourableAdverse

16. UNIT TITLE:Unit 2:Finance for Business LESSON TITLE:Budgets LEARNING AIM: B COMPETENCY FOCUS: Key Skills (L5): you will be able to develop your numeracy skills to calculate financial transactions of a business and to interpret financial data. Learning Objectives By the end of the lesson, you should be able to… LO1) To describe what a budget is and why businesses use budgeting. LO2) To explain the advantages and limitations of using budgets for planning. LO3) To calculate variance to determine the accuracy of budgets.