Budget and cost control slide share

BUDGET AND COST CONTROL
PRESENTED BY:
SHUBHAM KANAUJIYA
M.PHARM 1ST SEM PHARMACEUTICS
DEPARTMENT OF PHARMACEUTICAL SCIENCES
BBAU LUCKNOW
.

CONTENTS
 INTRODUCTION TO BUDGET
 PURPOSE OF BUDGET
 ELEMENTS OF BUDGET
 BENEFITS OF BUDGET
 CLASSIFICATION OF BUDGET
 INTRODUCTION TO COST CONTROL
 FEATURES OF COST CONROL
 STEPS IN COST CONTROL
 ASPECTS OF COST CONTROL
 AREAS OF COST CONTROL
 ADVANTAGES
 DISADVANTAGES
.

INTRODUCTION
 Budget is a written statement of planned activities of firm for a
definite period of time.
 A budget is a financial plan for a defined period of time , usually
a year.
 Budget may also include-
- Sales volumes and revenues
- Resources quantities
-Cost and expenses
- Assets and liabilities and
- Cash flows
2

CONT…
 Budget is total sum of money allocated for a particular purpose for
a specific period of time.
 A budget can be made for –
- A person
- A group of people
- A business and
- Anything else that makes and spent money
3

CONT…
 It is itemized summary of planned expenses for a given period
along with estimated income for that period,
 Once the budget is established , actual spending is compared
to the budget estimated.
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PURPOSE OF BUDGETING
 Budgeting tools provides a forecast of revenues and expenditure , that is construct a model of how a
business might perform financially if certain strategies , events and plans are carried out.
 These tools enables the actual financial operation of the business and to be measured against the forecast.
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ELEMENTS OF BUDGET
 It is a plan expressed in financial terms for attaining some objectives.
 It is prepared and approved for a defined period of time.
 It shows planned income to be generated.
 It shows probable expenditure to be incurred.
 It indicates capital to be employed during the budget period.
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BENEFITS OF MAKING BUDGET
 It controls the money.
 Increases the staff motivation.
 Plan for future
 It allocates the appropriate resources for the objects
 It helps in proper utilization of available resources.
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CLASSIFICATION OF BUDGET
1. Classification based on time factor
2. Classification based on condition
3. Classification based on function
4. Classification based on Flexibility Factor
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1) Classification based on time factor
i) Long term budget
ii) Short term budget
2) Classification based on condition
i) Basic budget
ii) Current budget
3) Classification based on function
i) Master budget
ii) Functional budget
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Functional budgets are further classified as-
a) Sales budget
b) Production budget
c) Material budget
d) Labour budget
e) Plant utilization budget
f) Purchase budget
g) Capital expenditure budget
h) Administrative expenses budget
i) R & D budget
j) Cash budget
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4) Classification based on Flexibility Factor
i) Fixed budget
ii) Flexible budget
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COST CONTROL
 Cost control is the practice of identifying and reducing business
expenses to increase the profit.
 It is the process of controlling the cost associated with an
activity in any organization.
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FEATURES OF COST CONTROL
 Cost control process involves setting targets and standards ascertaining the actual
performance.
 It aims at achieving standards.
 It is a preventive function
 In cost control , costs are optimized before they are incurred.
 It contains guidelines and directive management such , how to do a thing.
 Cost control focus on decreasing the total cost.
 Cost control is temporary in nature.
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STEPS IN COST CONTROL
1) Establishing the norms : The first step in cost control is to set norms or standards which may serve
as a yardstick for measuring the performance.
2) Comparison with actual : Compare the actual cost with the standard and compute the variances.
3) Corrective action : Remedial measures are taken to avoid the recurrence of variation in future and for
revision of standard wherever necessary.
4) Revision : And review the standards and revise them in the light of changed circumstances.
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ASPECTS OF COST CONTROL
1) Planning : Initially a plan or set of targets is established in the form of budgets and standards.
2) Communication : The next step is to communicate the plan to those whose responsibility is to implement the
plan.
3) Motivation : Motivation is the process that initiates guide and maintains goal oriented behavior.
4) Appraisal and reporting : Comparison has to be made with the pre determined targets and actual
performance.
5) Decision making : Finally corrective actions and remedial measures are taken or the set of targets are
revised , depending upon the administration’s understating of problem.
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MAIN AREAS OF COST CONTROL
1) MATERIAL COST CONTROL
2) LABOR COST CONTROL
3) OVERHEADS COST CONTROL
4) SALES COST CONTROL
5) ENERGY COST CONTROL
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1) MATERIAL COST CONTROL
 The insufficient use of materials is one of the prime cause of increased
cost of material.
 Wastage through poor control and design has risen to such an extent
that waste recovery is now a major problem.
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2) LABOUR COST CONTROL
 To control the cost of labor , one should look for ways to improve working
efficiency of labor.
 Labor cost have risen in three ways-
 Shorter working hours
 Reduced output
 Higher basic pay
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3) OVERHEADS COST CONTROL
 Cut overheads cost by using the facility as fully possible and looking
for ways to save energy.
 A proper selection of capacity , a right choice of equipment and its proper
maintenance are likely to keep overheads down.
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4) SALES COST CONTROL
 Sales control requires making sure that the industry is not over
spending to achieve its sales goal.
 Sales cost can be controlled by rearranging market segments
on the basis of demand
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5) ENERGY COST CONTROL
 Faulty designs result in excessive use of power and materials.
 Lighting cost can be reduced by high quality electronic energy saving bulbs.
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ADVANTAGES OF COST CONTROL
 Improve profit
 Reduces cost and price
 Greater productivity
 Maintains higher sales
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DISADVANTAGES OF COST CONTROL
 Reduces the flexibility and process improvement in a industry.
 Restrictions on innovation.
 Requirement of skillful personnel to set the standards for cost control.
 Sometimes it may reduce the quality of the product.
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REFERENCES
 https://www.iedunote.com/budget
 https://www.slideshare.net/sayedasalma/budget-and-cost-control
 https://www.slideshare.net/sowjanyareddy14019338/budget-and-cost-controll-unit-2
 https://accountlearning.com/cost-control-meaning-characteristics-steps-advantages
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