ABC Ltd., a mid-sized manufacturing company, has been facing frequent cost overruns and profit fluctuations over the past year. The management is…

Objectives of Budgetary Control System 1. Portraying with precision the overall aims of the business and determining targets of performance for each section or department of the business. 2. Laying down the responsibilities of each of the executives and other personnel so that everyone knows what is expected of him and how he will be judged. Budgetary control is one of the few ways in which an objective assessment of executives or department is possible. 3. Providing a basis for the comparison of actual performance with the predetermined targets and investigation of deviation, if any, of actual performance and expenses from the budgeted figures. This naturally helps in adopting corrective measures. 4. Ensuring optimum use of available resources to maximise profit or production, subject to the limiting facto Since budgets cannot be properly drawn up without considering all aspects, usually there is good co-ordination when a system of budgetary control operates. 5. Co-ordinating various activities of the business , and centralising control and yet enabling management to decentralise responsibility and delegate authority in the overall interest of the business. 6. Engendering a spirit of careful forethought , assessment of what is possible and an attempt at it. It leads to dynamism without being reckless. Of course, much depends on the objectives of the firm and the dynamism r of its management. 7. Providing a basis for revision of current and future policies. 8. Drawing up long range plans with a fair measure of accuracy. 9. Providing a yardstick against which actual results can be compared.