COMM 305 Chapter Notes - Chapter 11: Budget, Activity-Based Costing, Fixed Cost
7 Apr 2017
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One of management"s major functions is to control company operations. Control consists of the steps that management takes to be sure that the company meets planned objectives. The use of budgets in controlling operations is known as budgetary control. This is achieved by using budget reports to compare actual results with planned objectives. Budget reports are used because planned objectives often lose much of their potential value if progress isn"t monitored along the way. Top management requires periodic reports of progress of department managers toward their planned objectives. The feedback for a crucial objective, like having enough cash on hand to pay bills, may be made daily. For other objectives, such as meeting budgeted annual sales and operating expenses, monthly budget reports might be enough. Budget reports can be prepared as often as needed. From these reports, management analyzes any differences between actual and planned results and determines their causes.
