1. In your own words, explain what a budget is and why it is important for a business to have a budget.
2. Budgets are developed months before the end of the current year and are best guess estimates of future performance. What do you think might be some pitfalls of budgeting, and how can they be avoided?
3. Explain the different parts of an operating budget. Which budget should be developed first? Explain why?
4. Explain what a budget variance is. Is it good to have a budget variance? How can budget variances be avoided?