Friday, October 23, 2015

Evaluate how budgeting can contribute to a business achieving its aims

The main aim of any business is to earn profit. The
business can be trading, manufacturing, providing services, and job work
etc.


Whatever may be the nature and volume of business, the
businessman needs answer to certain basic question, what to produce? How to produce? How
much to produce?, Whom to sell? and once all these questions are answered, than the last
question remains that what would be the cost structure of the product ( Material cost,
Labor cost, Overhead cost) and how much its works out be for a given level of
operation.


Further businessman not only needs to know total
cost for a given level of operation but also the break ups for different elements of
cost like material labor and overheads. this is where the budgeting technique comes to
the rescue of an entrepreneur.


Budgeting provides answers
to many questions of a business. There are several types of budget like Flexible budget,
Fixed budget, Purchase budget, sales budget, production budget, Overhead budget,
material consumption budget, cash budget, Capital budget etc.

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