What is budgeting?

A budget is a plan for the future, usually set out in numbers. Budgets help
businesses to keep track of their finances and allow them to predict financial
outcomes, which can help with decision making and planning.  
Three objectives of budgeting
1) Estimate income and expense- a budget provides a realistic estimate of income
and expenses for a period and of the financial position at the close of the period

2) Action plan-budgets provides a coordinated plan of action which is designed to

achieve the estimates reflected in the budget.

3) Comparing the results- another objective of budgeting is to provide a

comparison of actual results with those budgeted and an analysis and interpretation
of deviations by areas of responsibility to indicate courses of corrective action and
to lead ro improvement in future plans.

Three styles of budgeting

1) Purchasing budget

2) Labor budget

3) Production budget

Discuss any two styles of budgeting

1. Purchases budget – This budget shows any goods or raw materials that need
to be purchased for future sale by the business.  
2. Labor budget – The labor budget outlines the estimated costs associated with
employees and management within an organization.  
Explain the difference between value added and non value added
A value-added cost is one that improves the quality of a product or service, or
enhances customers' perception of that product or service. Another way to think of
a value-added cost is an expense that customers are willing to pay for. A non-
value-added cost, by contrast, is one that adds to the total cost of a product or
service but does not outwardly enhance its value from a consumer perspective.
Give two examples of value added and non value added activities
Non Value added

1) Rework due to defects found in products

2) Corrections or rechecking done due to important process steps not completed

properly

Value added
1) Packaging
2) Shipping to customer