BUDGETS

BUDGETS
&&
BUDGETARYCONTROL
BUDGETARY CONTROL
 Meaning
BUDGET

Monetary/Quantitative expression of business plans

and policies to be pursued in the future period of time

BUDGETING

Process of preparing budgets and other procedures for

planning, coordination and control of business
enterprise
 Budgetary Control

Process of determining various budgeted

figures for the company for the future period
and then comparing the budgeted figures with
the actual performance for calculating
variances
 Types of Budgets

Accordin Basis of Basis of

g to Time Functions Flexibility

●
Long Term ●
Operating
●
Fixed
●
Short Term ●
Financial ●
Flexibl
●
Current Master e
●
 Fixed & Flexible Budgets
Fixed budgets are prepared when the activity
level is given
It does not change and cannot be used for more
than one purpose

Flexible budgets are series of budgets for

different level of activity
It can be used for more than one level
simultaneously
Fixed & Flexible Budgets - Difference
 Fixed Budget
It is like a cost sheet
Budget
Output Level - 5000 units
Particulars
Per Unit Amount
Material 50 250000
Labour 20 100000
Prime Cost 70 350000
Factory Overheads:    
Variable Overhead 15 75000
Fixed Overheads 10 50000
Works Cost 95 475000
Administrative Expenses 10 50000
Cost of Production 105 525000
Selling and Distribution
Expenses:    
Selling Expenses 6 30000
Distribution Expenses 5 25000
Total Cost of Sales 116 580000
  Per Unit

Material 50

Labour 20

Variable Overheads 15

Fixed Overheads (50000) 10

Administrative Expenses (5% variable) 10

Selling Expenses (20% Fixed) 6

Distribution Expenses (10% Fixed) 5

Total Cost of Sales per unit 116

 Flexible Budget
Output Level - 5000 units Output Level - 7000 units
Particulars
Per Unit Amount Per Unit Amount
Material 50 250000 50 350000
Labour 20 100000 20 140000
Prime Cost 70 350000 70 490000
Factory Overheads:        
Variable Overhead 15 75000 15 105000
Fixed Overheads 10 50000 7.14 50000
Works Cost 95 475000 92.14 645000
Administrative Expenses 10 50000 7.28 51000
Cost of Production 105 525000 99.42 696000
Selling and Distribution
Expenses:        
Selling Expenses 6 30000 5.66 39600
Distribution Expenses 5 25000 4.86 34000
Total Cost of Sales 116 580000 109.94 769600