importance of costs and budgets for the organization and its relation to decision making

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Chapter 1 Financial Statements

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importance of costs and budgets for the organization and its relation to decision making

Produced by Ginna Paola Ramirez using the website: https://www.mindomo.com/es/mindmap/f298785c10a84338b9d1e9cdda87b4be

organization

Although companies have not implemented a budget plan from the beginning, it is always kept in mind when making decisions

with a well-developed budget, organizations can remain in a highly competitive market

the budget is very fundamental since it controls and plans the profits of an organization

advantages and disadvantages of budgets:

disadvantages

some admins take the budget very strictly, which does not allow new financial alternatives to be explored

requires commitment from all levels of the company for its proper functioning, which is not always possible

implementation is expensive and time consuming

advantages

allows clarity regarding the sales, costs and expenses that each department of the company must meet

provides financial information for the company to generate competitive results

allows to determine if the company has the capacity to develop the planned activities

budget is defined as:

allows better clarity in the economic conditions in a company in areas such as:

investments

Bank transactions

financial liquidity

indebtedness

It's a financial plan designed to guide the businessman to get the targets of the proposed goals

involves materializing business plans in quantitative and monetary information

historical data is essential when making a budget

different types of costs

unit production

total cost

factory and non-factory

incurred

travel or replacement

investment

cost factors

indirect expenses

are considerable as free of control

direct expenses

there is a control by the company that repeals them

must be representative

must be quantifiable

must be identifiable

costs can be defined as:

the sum or effort used to produce something

the cost is recoverable at any time

the cost of giving up or sacrificing something to get