Budget Essay

Budget is a summary income and expenses of a given period. It provides you a comprhensive financial overview that helps coordinate financial and oerational activities. Its an open two way communication channel. Its is alike a measure of expected or desired performance.AdvantagesA compute is a quantitative panorama of a plan of action. These are the major benefits of effective cyphering. Budgeting compels managers to think and formalizing their prsponsibilities for planning. Budgeting provides an opportunity for managers to evaluate the activities and evaluate mod activities. Budgeting helps managers in communicating objectives and coordinating actions. budgeting provides benchmarks.Difficulties in implementing a budgetBudgeting can be expensive and sometimes its not even close to the actual subjugates. Some of the departments disagree with the budget goals. Similarly another difficulity is obtaining the exact sales forecasts. Any sort of false information would throw the budge t way off the line. So accuracy is really important while creating a budget. There are different types of budgets.Static budget predicts costs, revenues and profits at one level of output.Once it is made it doesnt change. Where as a flexible budget is a budget that has a flexibility to for the changes in the activity. It is more sophisticated and does not change end product according to the sales activity. Direct material variance the difference between the real purchase expenditure of material and the standardised purchase price of the material is known as direct material variance. centre direct material varicance can get by multiplying the difference of the price with the actual quantity pu.rchased. It is very helpful to managers in making purchase decisions and enable them to find it favourable or unfavourable. For example, if a association buys 100,000 units of material and pays $5/ unit, compare to the standard price of the material which is $8/ unit, it is a favorable pur chase. promote VarianceThe differecnce between actual pay rate and the standard pay rate is known aslabor variance. The difference can be found out by multiplying the difference to the actual number of hours worked. For example if the difference is $2/ hour, and 20 hours of work was put in, the labor variance can be found out by multiplying 2 to 20( 2*20= 40) so the total variance is 40.