Answer some simple statements about the fundamental principles of budgeting and of cost analysis.

You should think carefully about and try to answer the following questions with at least a line or two prefrably a paragraph of text:

• Why do organisations prepare budgets?
• How should a budget be structured in terms of the way costs and revenues are analysed?
• Is there any purpose in distinguishing between direct and indirect costs when presenting managers with financial information?
• Is there any purpose in distinguishing between fixed and variable costs when presenting managers with financial information?
• What conditions must be fulfilled for a cost to be relevant to a particular decision?
• What exactly is a cost driver?

Note some detailed paragraphs answering each of the bullet points.