Abstract
This chapter discusses the process of budget planning for an organization. The process of constructing the budget requires drawing together a wide range of sources information on technological capabilities, marketing opportunities, and resource availability. The coordination of the activities of the many subunits of the organization is achieved through the budget planning process. The planning process is modelled as an iterative exchange of information between the subunits, possessors of detailed knowledge of potential activities, and an accounting office that is responsible for producing the budgetary allocation of organizational resources. Budget planning processes are studied by a price guided mechanism. In this process, transfer prices, P, are established for the organizational capital. These transfer prices reflect the value of the resources to the organization, not the fair market value or replacement costs. Such accounting prices are used solely to guide the budget process toward the most profitable use of organizational capital and are changed throughout the iterative process as the accounting office builds successively better approximations of the decision elements.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.