btec business level 3 unit 2 d3

Topics: Budget, Cost accounting, Budgets Pages: 2 (683 words) Published: March 10, 2014
“D3: Evaluate the problems they have identified from unmonitored costs and budgets” Introduction:
For this task I will be discussing the effects of un-monitoring cost and budgets, and seeing how business could suffer if they are not look after responsibly. I will show disadvantages of not using this method properly. A cost of goods is what it should spend to make products. At the start of each period budget of production will be ready, using cost of goods and predicted production quantities. At the end of each period a variance report is prepared to compare the budget costs with the actual costs. The variance report can tell how well Gardiner Store PLC did at carrying out their budget aims. A favorable variance shows that actual costs are less than budgeted costs. An adverse variance is just the opposite - actual costs are bigger than the budgeted costs. By using a budget the management team can predict their future costs and cash needs, plan production, etc. Variance reports can help the managers to identify specific functional areas where they came in either over or under budget. They will try to repeat their successes and get rid of their failures. Each month they hope to become a little more efficient.  If budgets and costs are unmonitored

Two things mainly:
Costs can run out of control, causing organisations to spend more than they need to, run inefficiently, reduce their potential profit or at worst turn a profit into a loss, and budgets can be overstated and if an organisation actually spends less than it expects to in a particular area than those funds can be made available elsewhere in the business. If costs aren't monitored effectively such opportunities can be missed. If budgets are not controlled there are serious implications to the well-being: They will have to cut cost: The business need to do this because they haven’t monitor the business’ budget, so the actual costs will be higher than...
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