After reading this chapter, you should be able to answer the following questions:
What is budgetary control and why it is important in the overall performance management process?
How is a flexible budget different from a master budget?
What are the key variances that companies identify when analyzing flexible budget results?
How are variances interpreted?
How does a company utilize variance information to provide better cost control?
In this chapter, we describe how budgetary control takes place in organizations through the techniques of flexible budgets and variance analysis. A detailed example of variance analysis is provided that demonstrates the key variances which organizations monitor. The chapter also considers how cost control can be exercised in practice.
What Is Budgetary Control?
Budgetary control is concerned with ensuring that actual financial results are in line with targets. An important part of this feedback process is ...