Page 165 - P1 Integrated Workbook STUDENT 2018

Budgeting

Budgetary control

4.1 What is it?

Budgetary control is about assessing actual performance against budgeted
performance and taking corrective action when necessary.

4.2 Responsibility accounting

A key aspect of budgetary control is ensuring that managers account for the costs
(and/or revenues) for which they have responsibility. However this will only work
effectively if managers are appraised only on the costs which they can control.

Controllable costs are costs which can be influenced by the budget holder and are
generally considered to be those which are:

 variable or

 directly attributable fixed costs.

Uncontrollable costs are costs that cannot be influenced (i.e. their value can neither
be increased nor decreased) by management action. These would include
allocations of costs from head office, rental charges if the manager cannot make
decisions about location, marketing costs if marketing campaigns are created and
controlled centrally, etc.

Illustrations and further practice

Now try example 1 from Chapter 12.

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