Evaluate how budgeting can contribute to a business achieving its aims

tripu | Student

The main aim of any business is to earn profit. The business can be trading, manufacturing, providing services, and job work etc.

Whatever may be the nature and volume of business, the businessman needs answer to certain basic question, what to produce? How to produce? How much to produce?, Whom to sell? and once all these questions are answered, than the last question remains that what would be the cost structure of the product ( Material cost, Labor cost, Overhead cost) and how much its works out be for a given level of operation.

Further businessman not only needs to know total cost for a given level of operation but also the break ups for different elements of cost like material labor and overheads. this is where the budgeting technique comes to the rescue of an entrepreneur.

Budgeting provides answers to many questions of a business. There are several types of budget like Flexible budget, Fixed budget, Purchase budget, sales budget, production budget, Overhead budget, material consumption budget, cash budget, Capital budget etc.