Budgeting
The relevance of budgets when it comes to the management of organizational operations cannot be overstated. In this text, I discuss the various types of budgets. In so doing, I will make use of a hypothetical company by the name ABC Industries -- a Texas-based manufacturing entity. ABC produces blankets.
Types of Budgets
Budgets can be classified in numerous ways. The classification approach I adopt in this case is largely founded on the nature of an organization and its unique needs. To begin with, budgets can be classified on the basis of production flexibility. Under this classification, budgets could either be fixed or flexible. A fixed budget in the words of DuBrin (2011) "allocates expenditures based on a one-time allocation of resources." On the other hand, a flexible budget according to the author "allows for variation in the use of resources on the basis of activity" (DuBrin, 2011).
Budgets can also be classified on the basis of coverage or function, i.e. financial budget or operating budget. As Hansen, Mowen, and Guan (2009) point out, operating budgets focus on a firm's income generating activities. Such activities include purchasing, production, sales,...
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Relevance and Application of the Product Life Cycle Concept in Budgeting Company and business unit budgets often lend financial expression to strategy, inspire managers to attain generally understood targets and offer a logical framework for the analysis of outcomes. On the other hand, many companies suffer from badly conceived or incompetent budgeting processes which do not inspire accomplishment of targets and are of little value for operational management (Corporate Budgeting, n.d.). Life
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