Page 38 - Cost Accounting - Ready Reckoner

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CHAPTER – 12

Budgetary Control

Budgetary Control:

Budgets are prepared for planning for future. They are forecasts of future in
quantitative terms (either units or value), Budget is an estimate.

Budgetary Control is yet another technique of cost control where budgets are
established for every department and for various costs, such that cost is under control.

The following budgets are prepared:

1. Purchase Budget:

Purchase budget estimates the purchase of raw material required in quantity
and value. Purchase of a raw material is based on consumption of raw material.
Consumption is based on production.

Thus purchase budget is prepared as,

Particulars Amount(₹)
Consumption of raw material xxxx
Add: Closing stock of raw material xxx
Less: Opening stock of raw material xxx
Purchases (in units) xxxx
X purchase price/ unit xx
Purchase Cost (in value) xxxx

For eg: If raw material required/ consumed for production is 1,00,000 units. There is
already an opening stock of 20,000 units, which makes 80,000 units need to be
purchased. If a closing stock of 10,000 units is desired. Then 90,000 units
(80,000+10,000) must be purchased.

Thus the format of Consumption + C/s – O/s