Discussion Thread_ Cost Concepts, Budgeting, and Control

docx

School

Liberty University *

*We aren’t endorsed by this school

Course

323

Subject

Accounting

Date

Apr 3, 2024

Type

docx

Pages

Uploaded by JudgeShark1221

Discussion Thread: Cost Concepts, Budgeting, and Control 5.Why is it important to compare actual and budgeting results? How do these variances shape decision-making? Comparing actual results to budgeted results is an important part of financial management. Budgeting is a strategic planning technique that outlines an organization's predicted financial performance over a specific period. The budget serves as a standard against which actual achievements are evaluated. The goal of comparing actual and budgeted results is to uncover differences that may be utilized to influence choices and enhance future budgeting procedures. One of the primary reasons for comparing actual and budgeted performance is to discover discrepancies. Variances are the variations between the actual and budgeted results. They can be positive or negative and can be produced by a variety of circumstances such as market fluctuations, unanticipated costs, or budgetary blunders. Identifying these differences is critical to understanding an organization's financial success. For example, if actual revenue exceeds planned revenue, it might suggest that the organization's sales strategy is successful. If actual costs exceed anticipated expenses, it may suggest that the organization's spending needs to be adjusted. Furthermore, spotting differences is critical for making sound judgments. Variances give insight into an organization's performance and may be utilized to make budget modifications in the future. For example, if the difference between actual and budgeted revenue is positive, the firm may choose to invest more in its sales strategy. On the other hand, if the difference between actual and budgeted costs is negative, the company may need to cut spending in some areas. Variances can also influence decision-making by exposing potential regions of risk. For example, if the difference between actual and budgeted revenue is negative, it might suggest that the company's sales strategy is failing, and the business may need to examine other tactics to manage this risk. Similarly, if the difference between actual and budgeted spending is positive, the business may want to consider cutting costs in particular areas to decrease risk exposure. Ultimately, financial management relies heavily on comparing actual and budgeted performance. Variances give vital insights into an organization's financial performance, allowing you to make more educated decisions and enhance future budgeting procedures. Identifying variations allows firms to alter their plans, decrease risk exposure, and enhance financial performance. "For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it—" Luke 14:28 (NKJV). This verse emphasizes the need for planning and budgeting before starting a project. By evaluating the cost of constructing the tower, the builder may assess if they have the resources to accomplish the project. Similarly, organizations must plan and budget to ensure they have the resources to accomplish their objectives. Comparing actual and budgeted outcomes assists companies in evaluating their financial performance and making educated decisions to attain their goals.

References: https://opac.atmaluhur.ac.id/uploaded_files/temporary/DigitalCollection/ NWM0YjFiNjQzZDI5ZjczOTEyYTk1NzNkYzkwYTFmNzcwYWJlZmYyZA==.pdf https://www.biblegateway.com/passage/?search=Luke%2014%3A28&version=NKJV

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version