Which is not the limitation of budgetary control ?
Budgets do not pinpoint the lack of efficiency or the presence of it.
Budgetary control compares actual performance with budgeted figures so that deviations can be corrected. Its standard limitations are that budgets rest on forecasts, that the system is costly to run, and that it is only an aid to management; it can also create rigidity and resistance among staff.
Dependence on forecasts is a genuine limitation: budgets are built on estimates of sales, costs and prices, and if these prove wrong the budget loses reliability.
Cost of installation and operation is a genuine limitation: the system needs staff, records and time, which can be a burden, particularly for small firms.
Being a tool rather than a substitute is a genuine limitation: a budget does not implement itself, and without capable managers acting on it the system achieves little.
The claim that budgets do not pinpoint efficiency is false. Variance analysis between budget and actual shows exactly where performance is efficient or inefficient and fixes responsibility, which is one of the main advantages of budgetary control. So this is the statement that is not a limitation.
Hence, Budgets do not pinpoint the lack of efficiency or the presence of it.
Important Questions from Cost and Management Accounting
Match List I with List II
List I
(Type of Costing)
List II
(Description)
A. Marginal Costing I. Integrated approach to determine product features, product price, product costs and product design that helps ensure a company to earn reasonable profit on new products. B. ABC Costing II. The amount of any given volume of output by which the aggregate costs are changed if the volume of output is increased by one unit. C. Target Costing III. Used when identical units are produced through an on-going series of production steps. D. Process Costing IV. Costing system in which costs being with tracing of activities and then to producing the product. Choose the correct answer from the options given below:
Which one of the following is PV ratio for the company?
Which one of the following is the break-even point in units for the company?
Which one of the following is the break-even point in terms of rupees?
Which one of the following is desired sales volume in units to earn a profit of Rs. 60,000?
