6 - Budgetary control

Abstract

This chapter describes the planning, monitoring, and control of costs in a business. Planning involves considering what the future will hold for a business, making forecasts about the future, and then arriving at decisions on what the business should do in the future and the methods to be used to obtain the required results. Monitoring involves checking how performance toward those results is occurring. Control is the measurement and correcting of the actual performance to ensure that the chosen course of action occurs. The budgeting process involves managers in planning for future operations, making forecasts, considering how conditions might change, and how they might respond. It then indicates how they aim to proceed to achieve the aims of the organization by giving details of the plans. Budgets serve as vehicles by which the various parts of a business can bring together their plans to be coordinated into an overall plan for the business. The sales budget is a key budget from which the production budget and, consequently, the materials and labor budgets emanate.