1/23/2024 0 Comments Budget planning and control ppt5.00 Distribution expenses (20% fixed) Rs. 4 per unit (40% variable) Prepare a flexible budget at 80%, 90% & 100 % level.įor production of 10000 articles the following are budgeted expenses per unit: Direct materials Rs. produces 10000 units at 100 % capacity utilization & its cost structure is as follows: Fixed costs Rs. Prepared for various levels of activity – say 70%, 80 %, 90% Prepared by companies who cannot forecast sales and output with accuracy Types of functional budget Sales budget Production budget Production cost budget Raw materials budget Purchase budget Labour budget Production Overhead budget Selling & Distribution Cost budget Cash Budget Capital Expenditure budgetįlexible Budget or Variable budget Recognizes the difference between fixed and variable cost behaviour in relation to fluctuations in output, turnover, number of employees and other variable factors and is designed to change appropriately with such fluctuation. Types of Budgets DURATION - Short term, Long term CONDITION- Basic, Current COVERAGE – Functional, Master CAPACITY- Fixed, Flexible. Limitations of Budgetary Control Budget plan is based on estimates Danger of rigidity Budgeting is only a tool of management Opposition from staff Expensive technique Provides a yardstick against which actual results are compared Shows mgmt where remedial action is required Pinpoints efficiency or lack of it Good business practice of planning well.īudgetary control Budgetary control is a system of controlling costs which includes the preparation of budgets coordinating the departments and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve maximum profitabilityĬharacteristics Establishment of budgets Comparison of actual performance with the budgets Analysis of variations Remedial action Revision of budget in view of changes in conditionĪdvantages of Budgetary control Helps anticipate and prepare for changing conditions Coordinates activities of various departments Increases production efficiency, eliminates waste and controls cost Aims at maximization of profits through careful planning. Budgeting helps in : Obtaining economical use of resources Reduce waste Control on expenses Coordination of all depts. Provide direction towards the goalsīudgeting Refers to the management’s action of formulating the budget. ![]() Means of coordination of the business as a whole. BUDGETARY CONTROL A TOOL FOR PLANNING AND COST CONTROLĭefinition of a Budget “A plan quantified in monetary items, prepared and approved prior to a defined period of time, usually showing planned income to be generated and/or expenditure to be incurred during that period and the capital to be employed to attain a given objective” - ICMAīudget… A projection or estimate of future output, costs & revenue Guide or blueprint for the forthcoming period Expressed in monetary termsįeatures of a budget Indicates and declares the business policies Communicates the objectives and policies in numerical terms Specifies time frame to achieve them.
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