scaling techniques

Topics: Management, Budget, Control Pages: 10 (2743 words) Published: April 20, 2014
Managerial control is a systematic effort to set performance standard along with planning targets. There are various techniques of managerial control. All techniques can be classified broadly into two categories. Such as :- A. Budgetary control techniques

B. Non-budgetary control techniques

Budgetary Control Techniques

The word ‘budget’ is derived from a French word “Bougettee”. The meaning of this word is a leather pouch in which funds are appropriated for meeting anticipated expenses. A budget is a recorded plan of action expressed in quantitative terms. Budgetary control is derived from the concept and use of budgets. According to George R. Terry, “Budgetary” control is a process of comparing the actual results with the corresponding budget data in order to approve accomplishments or to remedy differences by either adjusting the budget estimates or correcting the cause of the difference.

There are generally four steps of modern system of budgetary control. These are mentioned below :- 1)Budget Policy Guidelines :- In an organisation, line managers have to base their expectations on various assumptions in time of preparing budgets. These assumptions are related to economy, political trends, government policies, competitors’ actions, strengths of organisation, basic managerial policies etc. The top management should prepare a common set of budget policy guidelines to be followed by all managers of middle and lower level. Budget Policy Guidelines also lay down the fundamental targets necessary for continuous progress of the business.

2)Preparation of Budgets :- According to nature, activities and size of organisation, different types of budget are prepared. Different departmental heads have to prepare their own budget as per guidelines given by the top management. Thereafter the budget committee would discuss all the budgets and observe that budgets are prepared within the safety margin.

Let us discuss some budgets-
i)Sales budget :- Sales budget is a future estimate of expected sales. It is the nerve center or backbone of an organisation. At the time of preparing sales budget different factors are considered such as past sales figures, Assessment and reports of salesmen, availability of raw materials, seasonal fluctuations, availability of finances, and plant capacity etc. Generally sales managers have to prepare the sales budget.

ii) Selling and Distribution Cost budget :- This budget is prepared along with the budget. This budget breaks down the figures for selling costs and distribution costs in groups for controlling such costs. So, this budget is to depend upon the sales budget. Because, selling and distribution cost are changed according to change of sales. The sales managers are responsible for preparing this budget.

iii)Production :- Production budget is also prepared in relation to the sales budget. Production budget is the estimation of production during budget period. Production budget includes amount of production, cost of materials, labour, factory overheads etc. Production planning, plant capacity, stock quantity, sales budget figures etc. are important steps to be followed in time of preparing the production budget.

iv)Production cost budget :- In the production cost budget, the future productions are expressed in terms of money. This budget estimates the total amount of cost to be spent for producing the amount of goods estimated in production budget. Production cost budget has three subsidiary budgets such as (a) Direct materials,(b) Direct Labour, and (c) Production overheads.

v)Purchase budget :- Purchase budget is derived from the direct materials and indirect material included by the overhead budget. This is a subsidiary budget, which gives the consumption of materials in the production process.

vi)Cash budget :- After preparing all cost budgets, the cash budget is prepared. Cash budget is the anticipated receipt and expenditure for a certain period...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about Program Evaluation and Review Technique (Pert)
  • Literary Techniques Essay
  • Film Techniques Essay
  • Essay on Sampling Techniques
  • Propaganda Techniques Essay
  • Sampling Techniques Essay
  • Essay about Immortal Technique
  • Selling Techniques Essay

Become a StudyMode Member

Sign Up - It's Free