bugetary control
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FEW BUSINESS PLAN TO FAIL , BUT OF THOSE FLOP, FAILED
TO PLAN
1Monika Kansal, University Business School, PURC,
Ludhiana
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A budget is The quantitative expression of a; proposed
plan of action by the management. • Next year I shall be increasing sales
substantially
• Next year I shall be increasing sales by 34%.
2Monika Kansal, University Business School, PURC,
Ludhiana
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For a specified period of time
In 2007 we shall be preparing the budgets for 2008.
in 2008 we shall be preparing the budgets for 2009.
And so on_______________
3Monika Kansal, University Business School, PURC,
Ludhiana
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Short term budgets may be monthly or quarterly or biannually.
4Monika Kansal, University Business School, PURC,
Ludhiana
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Helps in coordinating what needs to be done
Uncertain future
5Monika Kansal, University Business School, PURC,
Ludhiana
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Covers
• Both financial and non financial aspects
6Monika Kansal, University Business School, PURC,
Ludhiana
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Financial statements regarding the future
7Monika Kansal, University Business School, PURC,
Ludhiana
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Alternative terminology
• Performa statements• Targeting• Profit planning
8Monika Kansal, University Business School, PURC,
Ludhiana
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Types of budgets
From flexibility point of view• Static/ fixed• Flexible
9Monika Kansal, University Business School, PURC,
Ludhiana
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Flexible
• Conjures more realistic picture of actual variances
10Monika Kansal, University Business School, PURC,
Ludhiana
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In flexible budget emphasis is on
• Segregation of all costs in fixed, variable and semi-variable categories
11Monika Kansal, University Business School, PURC,
Ludhiana
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A hurried tour through cost behavior
• Materials @ 3 per unit• Labour @ 2 per unit• Expenses - Fixed Rs. 100,00,000• Semi-variable Rs 4 per unit
(calculated for 5000 units of which 60 % is fixed)
12Monika Kansal, University Business School, PURC,
Ludhiana
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MATERIALS ARE VARIABLE COSTS.
13Monika Kansal, University Business School, PURC,
Ludhiana
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SILK WORMS
14Monika Kansal, University Business School, PURC,
Ludhiana
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Indirect materials
Indirect labour
Indirectexpenses
FIXED
VARIABLE
SEMI –VARIABLE
15Monika Kansal, University Business School, PURC,
Ludhiana
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Is a budget same as estimate
• Simply guessing the future event under anticipated conditions
• With use of heuristics or scientific methods
16Monika Kansal, University Business School, PURC,
Ludhiana
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Is budget a forecast
• Assessment of probable future events
TATA SMALL CAR17Monika Kansal, University
Business School, PURC, Ludhiana
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Budget is the implication of the forecast
• Budgets starts where forecasting ends
18Monika Kansal, University Business School, PURC,
Ludhiana
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Budget is a part of budgetary control
PLANNING
CONTROLLING
COORDINATING
BUDGETARY CONTROL
BUDGETS
19Monika Kansal, University Business School, PURC,
Ludhiana
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Meaning of budgetary control
Establishment of budgetsContinuous comparisonsRemedial action Revision of standards ,if necessary
ACTUAL BUDGETED
20Monika Kansal, University Business School, PURC,
Ludhiana
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Budget ManualA document, schedule, booklet which inter
alia, responsibilities of persons engaged in the routine of and of forms and records required for budgetary control.
CIMA, London
21Monika Kansal, University Business School, PURC,
Ludhiana
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Budget period
SHORT TERM LONG TERMANNUAL
22Monika Kansal, University Business School, PURC,
Ludhiana
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STRATEGIES
SHORT TERMPLANNING
LONG TERMPLANING
SHORT TERM BUDGETS
LONG TERM BUDGETS
23Monika Kansal, University Business School, PURC,
Ludhiana
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Master budget
• The summary budget incorporating its functional budgets and is finally approved, adopted, employed.
24Monika Kansal, University Business School, PURC,
Ludhiana
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A case study- a million more cars
Demand forecast for 2010 – 2.2 to 2.3 million cars society of Indian Automobiles ManufacturersSource- BW,29 jan 2007
25Monika Kansal, University Business School, PURC,
Ludhiana
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• Retail sector opens up- Income of agricualture dependent people shall increase leading to increase in demand for automobiles
• The global automibile market moving towards small cars, fresh demands from even developed markets
26Monika Kansal, University Business School, PURC,
Ludhiana
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Long term strategiesbig –bang announcements
• Tata motors rs. 10,000 crores investments by 2009-2010
• Tata and Fiat rs.4000 crores plant• M& M and Renault half a million cars
capacity plant• Hyundai mulls doubling the capacity from
3,00,000 to 600,000 cars
27Monika Kansal, University Business School, PURC,
Ludhiana