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BTEC Business Unit 2, Busness Resources M4 D3 (Analyse the reasons why costs need to be controlled to budget) (Evaluate the problems they have identified from unmonitored costs and budgets)$10.30
BTEC Business Unit 2, Busness Resources M4 D3 (Analyse the reasons why costs need to be controlled to budget) (Evaluate the problems they have identified from unmonitored costs and budgets)
BTEC Business Extended Diploma
Unit 2: Busness Resources M4 D3
This is the complete version of the coursework assignment, which has already been marked and approved by a teacher.
P1 P2 P3 P4 P5 P6 P7 M1 M2 M3 M4 D1 D2 D3
(Analyse the reasons why costs need to be controlled to budget)
(Evaluate the ...
1) Know how human resources are managed
2) Know the purpose of managing physical and technological resources
3) Know how to access sources of finance
4) Be able to interpret financial statements
Task 6:
a) Analyse the reasons why costs need to be controlled to budget.
b) Evaluate the problems they have identified from unmonitored cost and budgets.
M4, learners should show an awareness of the problems that can arise if costs are not controlled to
budget.
This can be demonstrated by looking at a given scenario and breaking down the various elements of
the budget to determine why it is overspent and by identifying the problems that this will create for
the selected organisation.
For D3, learners will build on the evidence provided for M4. They will evaluate the problems they
have identified from poorly controlled budgets by looking at the potential consequences for
organisation arising from the budget variances.
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, Unit 2: Business Resources M4 D3
Importance of controlling budget costs
Budgeting – it is a system of planning and controlling company’s expenses.
Any modern successful business sets up budget to help them control costs in order to protect profit
margins and achieve targeted profit/growth levels.
As well as to be more descriptive, budget systems are sometimes called management planning and
control systems. The emphasis is on planning but the real payoff is in the control that can come from
the planning.
Example: The key to General Motors success, according to a recent report, is “Cost awareness in
every detail up and down the managerial ladder” and a budget system in which “Top management
expects and gets detailed reports from division people on performance as measured against agreed
upon goals.”
More successful budgeting systems in operation today can lead, TESCO PLC for example, to
the following features occurring within the organisation:
1) A heavy accent on detailed planning related to long term profit objectives;
2) Involvement and support of all levels of management;
3) Identification of unit costs for reasonably similar repetitive activities;
4) An examination of all expenses for their “cost effectiveness”;
5) A detailed analysis of significant differences between actual and planned results to establish
cause.
The inadequacies in budget systems in TESCO PLC for example, may arise from any of the
following:
1) Lack of management support
2) Lack of understanding of the company’s activities and its structure
3) Little or no planning
4) Lack of a focus on profit
5) Little or no flexibility
6) Poorly defined responsibilities
If costs are not monitored then:
A company would not know what it is doing right and what it is doing wrong. It would not know
what policies are profitable and in which geographic areas, as well as, it would not know the kind
and volume of business of each of its producers and how profitable their business has been and is
likely to be.
If a company doesn’t know what is likely to happen in the marketplace in the next five to ten
years, it’s will be hard to say what it is supposed to do to achieve the best results possible over the
long pull and in the coming year.
Furthermore, managers may not notice problems because they are not aware of internal and
external situation of their business. Managers can’t take steps to correct the problem if they don’t
know it exists.
The effectiveness of the budget system is minimised, where management fails to delegate its
authority for planning and execution. Delegation is facilitated with a budget system because it
provides a means of identifying responsibilities and measuring performance.
Advantages of budgeting and managing costs effectively:
The production potential of the company will be assessed. This will be based on information and
recommendations furnished by each field office. A determination will then be made as to the best
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