ACCT10001 Lecture Notes - Lecture 10: Cost Driver, Operating Expense, Income Statement
27 Jul 2018
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Document Summary
Focusses on the broad strategic direction of the entity (e. g. ) Considers key issues (e. g. ) expansion, new product development. Setting realistic and achievable targets still challenging. Each month closes new month is added. Capable of adjustments as new information arising during the period. Participative budget formulated through negotiation between employees and management. Some figures have cost drivers (e. g. ) sale volume drives variable costs. External factors (e. g. ) social, economic and market factors. Uses previous year"s results as a starting point. Alert management to problems in advance (e. g. ) cash shortages. Enables mangement to apply strategy testing and consider impact of this on results. Budgeting allows us to identify the problems that could be placed before us in the future, and thus take the corrective action in advance. Budget better represents the economic reality of business. Once the budget is implemented, it can facilitate control by: Allows us to respond to how we"re tracking towards the target.
