210461 92199 1 TM C Part 1 solutions

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Introduction
Budgets are used for detailed planning in the organization. Based on the budget, the resources are allocated to different activities. Top management would create the budget but this budget should be spread to low level management. One of the budget information problems is to cut short the expenses in every department based on the constraints put up in budget. This budget information problem is also rooted in the way resources are to be allocated in the organization. It can be said that, ‘resource allocation’ is the biggest and painful task after the declaration of budget. The budget information problem was limited in nature when the size of organizations was small. With
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Many experts have believed that early planning is the key to success. Quarter 1 is the time when organizations should start with the planning of the budget. There are different methods of costing that can be used by the organization. It is recommended that management should also do the break-even analysis. Break-even analysis identifies the level of activity and risk at which an organization can generates no surplus or deficit.
Organizations should cover budgeting as a part of control process. Many a times, organizations would deploy the effective control process but there are cases when budgeting is not given due consideration. It is recommended that organizations should have a centralized process of control wherein they can manage the budget of different departments.
Organizations should divide the entire budgeting plan into different small plans. There should be a large budget that controls the expenses for different activities and across different departments. Organizations should adopt the methodology of incremental budgeting where in budget planners plan the budget in an incremental manner. A budget is created every quarter that is then reviewed by the top management. The SMART objectives aims at developing the objectives or solutions that are Specific, Measurable, Attainable, Relevant and Time Bound. As far as solutions around budgeting problems are considered the time should be 1 year. It is

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