CHAPTER-1

INTRODUCTION

1.1 INTRODUCTION
We may also see from Allen's work that a strict approach to budgetary control is necessary
because of the fast-paced changes in today's business environment. According to him,
comparing actual results to anything that was budgeted up to a 14-month period in the past is
no longer useful. He contends that accountability for articulating the distinctions between
actual and standard would be one of the prerequisites of a more well-rounded system. This
necessitates information reporting in a more urgent manner. Consequently, strategic
management and budgeting are required.
The major factors that the budget and budgetary control give consideration to all corporate
activities are control costs, future planning concerns, sales estimation, all revenue,
expenditures, and cash, as well as a comparison of the actual results to expected outcomes.
Budgets and budgetary control are essential for every business's long-term growth and profit
maximization. Approximately 70% of all businesses employ traditional methods for
budgeting and budgetary control today.
Building any successful company needs a number of essential components, including
budgeting, budgetary control, and performance measurement. There is no denying the fact
that a firm can succeed without controlling its tactics and direction, along with its location and
progress, and without keeping track of how close it is to its goals. The purpose this study's
goal is to determine how budgeting, budgetary control, and performance measurement are
related.
Spend some time gathering opinions from the major actors in this business about how the
budget affects their initiatives and the degree to which budgets are utilized in day-to-day
operations. Budgets are crucial for prudently managing precious budgetary assets while also
acting as a mechanism for consumption, control, and assessment. For prosperous
organizations, creating agreements requires careful thought about budgets and financial
management. Strong financial management and efficient budgeting are frequently essential
for their associations' success.
A budget nearly often relates to both the administrative and accounting skills of an
organization. The requirement for a budget expands along with the company's size because a
budget is a useful tool for controlling and arranging. Budget is helpful in enabling the firm's
Budgeting and expense tracking provide you a greater comprehension of where your money is
going and can aid in your achievement of financial goals.

1
Financial objectives being one of the primary causes of conjugal agreement and separation, so
taking control of our spending, finishing a financial plan, and saving money for the future can
all have great consequences depending the nature of your partnership or spouse. Keeping
track of your financial commitments necessitates a budget. Some people associate the word
"budget" with something bad. Consider Budget as a tool to advance your goals rather than as
a financial holding or asset.

1.2 INDUSTRY. PROFILE AND COMPANY PROFILE

AUTOMOBILE INDUSTRY
Despite the fact that steam-powered road vehicles were developed earlier, the invention of the
petrol engine, particularly in France and Germany in the 1860s and '70s, is credited with
creating the automotive industry. British, Italian, and American producers had joined German
and French manufacturers by the turn of the 20th century.
Markets, component parts, and final commodities are all considered. Due to this, there are
ever more players in the worldwide auto sector. Automobile and component sources are
becoming more international. In the situation of the auto business, globalization has never
advanced at a faster rate-not only for example sourcing of Japanese engine, but also in
relation to a sports vehicle being produced in Australia and sold in the U.S. under a Big Three
label.
More thorough knowledge of various country economies and industries is necessary for
developing global strategies and spotting global opportunities. Each pattern of evolution can
be linked to a different set of environmental factors. This is particularly true for the
economies of emerging nations, which places more restrictions on expansion.
About 49 percent of India's manufactured GDP and 7.5 % of the overall GDP are contributed
by the auto industry.

INVENTION
August Schrader
Around 1890, after reports of English cyclists' success using pneumatic tires, August Schrader
saw the necessity of a bicycle tire valve. By 1891 he had produced the Schrader valve, which
he created and which is still in use today.

2
1.3 HISTORY AND GROWTH OF A.B INDUSTRY
A.B. Industries was established in 1975 by our visionary founder M.V. Gokarn. A.B.
.

Industries began the manufacture of valves for tyres and inner tubes industry in 1978 and
quickly emerged a dominant brand in India. As the automobile industry grew in India, grew
into the biggest manufacturer of tyre valves in India. The introduction of tubeless tyre A.B.
Industries began manufacturing tubeless tyre valves and evolved from a Tier 2 to a Tier 1
supplier to the automobile industry. With its strong focus on the calibre of the goods, R & D,
A.B. Industries has now evolved becoming a manufacturer of precise goods and an essential
valves and component provider to a diverse range of customers and industries from a
conditioning system and hydraulics to aerospace, mining, defense and industrial HVAC & R.
Our main office is in Bengaluru, India and our manufacturing facilities and R & D Centre are
located in Mysuru. We also operate warehouses in Bengaluru, Chennai and Delhi in order to
serve our customers with Just-In-Time deliveries. All our facilities conform to IATF 16949,
ISO 14001 and BS OHSAS 18001 standards.

PROMOTERS
The biggest manufacturer of vehicle tire tube valves , valve cores , HVAC, TPMS, and
. .

accessories in India is A.B Industries. To suit the varied needs of our consumers throughout
the world, We've been creating and producing high precision goods for more than three
decades.
Chairman S. K. Welling,
Mr. Welling holds a mechanical engineering bachelor's degree from Karnataka University,
and a master's degree in business administration from the University of Leeds in the United
Kingdom. He previously served as HMT Ltd.'s executive director.

A.B. Industries was established on 1975 by our visionary founder M.V. Gokarn. A.B.
Industries began making valves for tyres and inner tubes industry in 1978 and quickly
emerged a dominant brand in India. As with the auto industry grew in India, grew into the
biggest manufacturer of tier valves in India. The introduction of tubeless tyre A.B. Industries
began manufacturing tubeless tyre valves and evolved from a Tier 2 to a Tier 1 supplier to the
automobile industry. With its strong focus on the calibre of the goods R & D, A.B. Industries
has now evolved becoming a manufacturer of precise goods and Valve and component

3
 Provider that is essential to a diverse range of customers and industries from climate control
and hydraulics to aerospace, mining, defense and industrial HVAC & R. Our main office is in
Bengaluru, India and our manufacturing facilities and R & D Centre are located in Mysore.
We also operate warehouses in Bengaluru, Chennai and Delhi in order to serve our customers
with Just-In-Time deliveries. All our facilities conform to IATF 16949, ISO 14001 and BS
OHSAS 18001 standards.

1.4 VISION, MISSION AND QUALITY POLICY

Vision:

“We aim to establish new standards of excellence on a global scale across all facets of
business.”
Mission:
“Our focus extends beyond the manufacture of tire valves. We're committed to enhancing
safety for the transportation of individuals and products across India.”

1.6 PRODUCT AND SERVICES PROFILE

o The Tubes Valves

o Auto-Air Conditioning Valves
o Accessories
o The Components & Valves For Ctis ,

o Flash Buster

Infrastructures Facilities
Infrastructures – Existing

Building: The unit has constructed nearly 14500 Sq. Ft of Building out of which 55 AC Sheet
Shed, 4500 Sq. ft. of main building in the ground floor and 4500 Sqft of main building in the
first floor.

Land: The total area of land acquired, consequent to acquisition of M/s JJ Polymers Pvt Lid
& M/s SanjosePolymesPvt Ltd measures approximately 4 acres Subsequently, after
acquisition, company further purchased adjacent land from M/s PasupriyaFeeds measuring
arrpoxl acre.

4
Power: Company has 800 KVA power line sanction from electricity department. The existing
limit is sufficient to carry our existing operation; also company is having 160 KVA MWM
and 140 KVA Cumming DG sets for meet the requirement of company's operations.
Manpower: The labour requirement of the unit is of skilled, semi-skilled and unskilled
worker, since, Mysore city is having so many polymer industry it is not a problem for getting
the skilled employees. Details of employees given below
Administrative Staffs - 10 No’s
Technical Staffs - 15 No’s
Workmen - 30 No’s
Trainees - 50 No’s
Contract Labours - 80 No’s

1.7 COMPETITORS INFORMATION

Competitors for A.B INDUSTRY in National market
 MRF
 GOOD YEAR
 CEAT
 APOLLO

1.8 SWOT ANALYSIS:

MEANING:
A's primary objective SWOT analysis is to raise awareness of the elements that affect the
formulation of a company decision or business strategy. For this, SWOT analyses the
surroundings both inside and outside and the factors that can influence the monetary success
of the choice.

DEFINITION

SWOT analyse is a method for identifying and analysing internal strengths and weaknesses
and external opportunities and threats that shape current and future operations and help
develop strategic goals.

5
STRENGTHS
 Very large distribution channel.
 Reasonable price.
 Strong financial positions putting a higher priority on excellence than quantity.
WEAKNESSES
 Less Brand Awareness.
 Lack of working experiences.
OPPORTUNITIES
 Signing partnerships with some of well-known Technological companies.
 Compared to other market participants, A.B INDUSTRY is better positioned to take
advantage of this opportunity.
THREATS
 The debut of fresh players newer and better technologies is the modest car tyre
segment.
 So many close competitors like Apollo,MRF,CEAT
 Entry Barriers: High.

1.9. THE FUTURE DEVELOPMENT AND PROSPECTS:

A.B. Industries intended to create innovative products to address evolving consumer needs.
Additionally, it is suggested to concentrate on process optimization's both cost savings and quality
improvements. The corporation has also highlighted the necessity to lessen the damaging effects on
the surroundings of production. It is suggested that projects be undertaken to replace current
processing that is more environmentally sound ones.

 Localization of Supplies: Our primary focus lies in reducing dependency on imported

tools, spares, and raw materials. By developing domestic alternatives, we aim to
bolster our self-sufficiency and decrease reliance on external sources.
 Diversification of Product Portfolio: We are actively engaged in broadening our
product offerings beyond tire valve cores. This involves conceptualizing and
producing innovative products that cater to both domestic and international markets.
 Global Expansion of TMPS Valves and Sensors: With a global outlook, we're
,

dedicated to crafting top-tier Tier Pressure Monitoring System (TMPS) valves and
,

sensors. This initiative targets both the domestic market and international exports,
contributing to our growth on a worldwide scale.

6
 Elevated Performance Solutions: Our investigation And growth endeavours are
directed at creating high-performance goods designed to excel under severe instances
of high temperature and pressure. This positions us as pioneers in providing solutions
for demanding environments.
 Transition to Sustainable Materials: We are committed to sustainability by phasing
out the application of hazardous materials in our manufacturing processes. This
transition involves embracing eco-friendly alternatives, aligning our operations with
environmentally responsible practices.

7
 CHAPTER-2

THEORITICLE BACKGROUND OF THE STUDY:

2.1 Meaning of budget:

The word "budget is a very familiar term extensively used in all walks of life, domestic,
business and national -budget is prepared to control the use of funds available for defined
.

objective as far as possible. The Charted Organisation for Management Accounting, England,
describes a budget as under. "A pre-established and formally approved strategy, outlined
.

within a specific timeframe that is described using the phrases of monetary value. This plan
typically illustrates projected earnings to be generated and/or costs to be expended over the
defined period, along with the financial resources to be utilized the completion of a particular
goal".

A budget can be defined as a structured outline presented in measurable terms, often

involving monetary units that encompasses a defined timeframe, commonly spanning a year.
Essentially, Budgets are used as an organized strategy for efficiently deploying both human
workforce and tangible resources.

As an organisation setting, a budget serves as a projection of anticipated expenses and

income. Budgets can be categorized into two fundamental types: Capital Budgets and
Operating Budgets.

Capital budgets encompass allocations for prospective outlays on novel projects and
frequently demand distinct funding mechanisms. Conversely, operating budgets are aimed at
attaining immediate operational objectives of the entity, such as production milestones or
profitability targets within a corporate setting. These operational budgets can be further
disaggregated into distinct departmental or functional budgets.

2.2 ADVANTAGES OF BUDGETS

1. Enhances Efficiency and Performance:

 Drives improvements within the organization's operations.
 Boosts overall efficiency by streamlining processes.
2. Facilitates Communication of Plans:
 Ensures consistent understanding across organizational units.
 Works as a medium to convey strategic plans.

8
 3. Motivational Guidance for Managers:
 Inspires managers to reach designated objectives.
 serves as a motivational tool to attain unit-specific goals.

BUDGET AND FORECASTS:

An outlook is assessment of probable future events, while the budget relates to planned
events. The budget's foundation is the implications of a forecast and their forecasting precedes
the process of budget.

BUDGETARY CONTROL AND BUDGETING

In their book "Budgeting for management control" Rowland and William have effectively
pulled out the Variance b/w budgetary control And budgeting which we as follows:
.

"Budgeting can be discribed as the process of creating budgets, while budgetary control
encompasses besides this procedure but also involves the strategic development of budgets
and their effective utilization. It serves as a comprehensive management tool, incorporating
the science of budget planning and utilization to influence overall business planning and
control”.

Meaning of Budgetary Control : .

"It involves creating budgets that correspond to the responsibilities of executives regarding a
particular policy. Additionally, it entails systematically comparing actual outcomes with the
predetermined budgets. This comparison serves two main purposes: firstly, it aims to ensure
that individual actions align with the policy's objectives; secondly, it provides a foundation for
potential adjustments to the policy if necessary."

2.3 Scope of Budgetary Control:

Budget Preparation and Comparison: Budgets are formulated for different company
functions, such as production, sales, and more. Actual performance is compared against
budgeted figures and closely monitored.

Comprehensive Organizational Coverage: Budgets have a wide-ranging scope,

encompassing various aspects of the entire organization.

9
Elemental Division of Operations: Operations and procedures are divided into individual
components or elements. Each element is allocated a specific budgetary value for better
control.

Examination of Activity Costs: Budgetary control involves a detailed analysis of the sources
and nature of activity-related costs.

2.4 Objectives of Budgetary Control : .

Making forecasts and future plans, analysing differences b/w real results versus predictions,
and developing a baseline or standards against which to evaluate.

The General objectives of budgetary control are as follows :.

Planning and Coordination: Budgetary control helps organizations set clear financial goals
and objectives for different departments and functions. This ensures that they are consistent
with the overall organizational strategy and That assets are used effectively to achieve them.
Budgets provide a roadmap for various departments to coordinate their efforts and work
towards common goals.

Resource Allocation: One of the primary objectives of budgetary control is to allocate

resources such as funds, labour, and materials efficiently and effectively. By creating budgets
for different activities, departments, and projects, organizations able to guarantee that assets
are distributed according to priorities and strategic requirements.

Performance Measurement: Budgets act as a guideline against what really performed can be
measured. By comparing actual financial outcomes to the budgeted figures, organizations can
assess their performance and identify areas of deviation. It permits initial identification of
potential problems and the implementation of corrective actions as needed.

Cost Control: Budgetary control enables organizations to control costs by setting limits on
spending and expenses. It helps managers and decision-makers identify areas of overspending
or cost overruns, allowing them to take corrective actions to bring costs back in accordance to
the budgeted amounts.

Motivation and Accountability: Budgets can serve as motivational tools for employees.
When individuals and departments are given specific financial targets they are more likely to
succeed in achieving focus their efforts on meeting those targets.

Budgets also enhance eaccountability, as individuals and teams can must bear accountability
for their actions relative to the budget.

10
Communication and Coordination: Budgets facilitate communication between Various
stages of management within an organization. They provide a common financial language that
helps managers at various levels understand the financial implications of their decisions. This
improved communication enhances coordination among departments and prevents conflicting
objectives.

2.5 ESSENTIALS OF BUDGETARY CONTROL

Budgetary control enables monitoring by constantly contrasting results from the budget with
.

real performance. A method of controlling the budget can only succeed if Exists a certain
condition and height, the absence of which interferes well, and greatly negates worth of a
budgetary System within any industry. These are the facts And heights necessary for effective
.

budgeting is the following:

1. Clear Objectives and Goals: - Budgetary control begins with establishing clear and
specific objectives and intended outcomes of the organization, departments, and
projects. These Objects must be in line to the overall strategic direction of the
company.
2. Budget Preparation: - The process of creating budgets involves gathering relevant
data, analyzing historical performance, and projecting future financial needs. Budgets
should be comprehensive, covering all aspects of the organization's operations, such as
revenue, expenses, capital expenditures, and investments.
3. Top Management Support: - The active support and commitment of topmost
managers are essential for the achievement of budgetary control. Senior leaders need
to support budgeting process and communicate its importance throughout the
organization.
4. Clear Communication: - Communication is key in budgetary control. Budgets must
be communicated clearly to the necessary parties, ensuring that everyone is aware of
responsibilities responsibilities, targets, and the budgeting process itself.
5. Variance Analysis: - Variances, or differences between actual and budgeted figures,
need to be analyzed to understand their causes. Positive variances (where actual
performance exceeds budgeted amounts) and negative variances (where actual
performance falls short of the budget) should be examined to determine their
underlying factors.

11
 6. Flexibility and Adaptability: - Budgets should be designed with some degree of
flexibility to accommodate unforeseen changes in the business environment. This
allows the entity that will react to unexpected events or opportunities effectively.

2.6 TYPES OF BUDGET

LONG – TERM BUDGETS

Long-term budgets were prepared for 5-10 years. It is they concerned with planning the
company's operations and the future in a considerably long-term perspective. The long-term
budget was prepared for 5-10 years. They care about the organization of the company's
operations and the future more than the extended time. Long-term budgets are usually
planned only by the monetary policy "controller" of top management. These financial
budgets are very useful for atomic structures (e.g.:- Moravia) or interest rates, since valuing
accumulated assets over such an extended span of time can be difficult. Capital and revenue
plans, etc. are examples of long-term budgets. utilization, innovative work

SHORT TERM BUDGETS

A short-term budget, also known as a short-range budget, is a financial plan that covers a
relatively brief period of time, usually up to one year. Short-term budgets are often used by
individuals and businesses to manage their day-to-day operations and immediate financial
needs. These budgets are more detailed and focused on the near future compared to longer-
term budgets. They help allocate resources, control spending, and ensure that monetary
objectives met in the short run. Short-term budgets are especially beneficial for controlling
cash flow and making quick adjustments based on changing circumstances.

CURRENT BUDGETS
"Current budget" typically refers to the financial plan or allocation of funds for a specific
period, usually a fiscal year, that an organization or government entity follows to manage its
expenditures and revenues. This Budgets provide financial information is allocated to
different departments, programs, projects, and events, in addition how the organization plans
to generate revenue to cover its expenses.

12
OPERATING BUDGET
An operating budget, is a financial plan that outlines an organization's projected revenues,
expenses, and profit or loss for a specific period, typically a fiscal year. It is a crucial tool for
managing day-to-day operations and making informed financial decisions. The operating
budget provides a detailed breakdown of the expected costs and income associated with an
organization's core activities.

The averagely used operating budgets are:

1) Sales budgets

2) Purchase budgets

3) Raw material budgets

4) Labour budgets

CASH BUDGET
A cash budget is a financial tool used by businesses and individuals idea and manage their
.

cash flows over a specific period of time, usually on a monthly or quarterly basis. It helps
with the purpose of ensuring a enough cash available to cover both anticipated expenses and
expected revenue. By estimating cash inflows and outflows, a cash budget can help prevent
cash shortages and aid in making informed financial decisions.

Osisioma (2000) opines that cash budget represent the transactions involving money and the
estimates cash balance flowing in and out over the budget periods.

Key objectives of a cash budget :-

 Cash Flow Management: The primary objective of a cash budget is to manage cash
flows efficiently. By estimating cash inflows and outflows over a specific period,
individuals and company can make sure they have enough liquidity to cover their
expenses, investments, and financial obligations.
 Debt Management: For businesses that have loans or debt obligations, a cash budget
can assist in planning for timely debt payments. This prevents default and maintains a
positive relationship with creditors.
 Financial Decision Making: A cash budget provides valuable insights for making
informed financial decisions. It helps assess the feasibility of new projects,
expansions, and other strategic initiatives based on available cash resources.

13
  Optimizing Investments: Cash budgets may be used to find the surplus cash that
could be invested for short-term or long-term gains. Figuring out how to do this excess
cash can be invested in interest-bearing accounts, short-term investments, or other
opportunities to earn a return on idle funds.

THE MASTER BUDGET

Osisioma (2000) say that budget is a coordinating instrument and a summary out of all the
,

financial budget within a company corporation the sales production operating expenses and
financial budgets. It represents a compilation of each and every supporting budgets and
financial effect of the total plans for the business. The master budget is actually a budget's
,

earnings report and financial report combined.

Sale Budget, Selling Inventory Budget Budget Income Statement, Admin Expenses Budget,
Selling Expenses Budget. Cost of goods sold budget, Direct Material Budget, Cash Budget,
Factory Overhead Budget, Budget Statement of Change in financial position, Budget Balance
Sheet Man Bull Flow Chat.

FIXED BUDGET
.

Fixed budgets utilised frequently by businesses that rely in their forecasts de (1968) composes
,

that examined problem with bookkeeping writing is wider get pught to be settled or variable
concerning volume or deals or different inguns Settled plan is alter a Budget formerly made
and acknowledged can't be changed for re unknown being that altered expense are caused and
endures independem of purchasing power.

FLEXIBLE BUDGET
As stated by Garrison (2000), A flexible budget mirrors the impact of alterations within the
budgeting situation which influence the execution of the monetary allowance, it doesn't bind
itself to stand out level of action and real results don't must be thought about against budgeted
expenses at the first movement level.

CAPITAL BUDGET
Pandy (1999) defines or characterizes capital budgeting for instance the company's choice to
contribute a substance's a current finances most productively in long-term exercises in
foresight of a normal stream without bounds advantages more than a progression of years. ,

14
SALES BUDGET
.

Stanton (1971), Radford And Richardson [1963] expressed their notice that foundation of
fruitful promoting arranging a business is the estimation and estimating of business sector
request. The key figure expected to gauge the sales conjectures on the grounds because it is
premise for all planning and every activity in the business. View that "adequacy of Budgetary
Control relies on upon the precision of offers appraisals." In company making to be able to
maximize income of the firms or organisations, its industry strategy is essential in light of the
reality it helps in deciding benefit for the during the time.

2.7 REVIEW OF LITERATURE

Ama [2003]1 Budgetary control is an important instrument for effective planning and
measuring actual performance against the budget. It serves as a yardstick for analysing
variances and helps coordinate various aspects of an industry. While the involvement of top
management is crucial, the active participation and It's crucial to comprehend middle and
lower management for the budgetary process to succeed. Budgetary control significantly
contributes to both planning and controlling expenses. By comparing real outcomes in
comparison to planned results, favourable or unfavourable variances can be identified and
analysed. This enables management in order to establish these variances and create future
selections that are informed.

J. S. OREBlYl and A. I. UGOCHUKWU [2004]2 this study examines the processes,

practices, and policy implications with reference to budgetary control and budgeting in
.

Nigeria. The research's conclusions, derived from both documentary sources and time-series
data, reveal a consistent pattern over the past twenty years. There has been a throughout this
time frame steady rise in the overall expenditures of the Federal Government, coupled with a
concurrent decline in revenue generation. Because of this circumstance, fiscal operational
deficits, posing a challenge for the government, which lacks the necessary means – both in
connection with political resolve and financial discipline – to effectively manage and regulate
its budgetary outlays. This, in turn, has hindered the government's ability to succeed a
balanced budget or including an excess.

Lambe Isaac & Mary Lawal [2005]3 , budgetary control and budgets are integral
components of organizational management, involving an arrangement for managerial goals
and making something a structured process that provides a foundation for effectively
coordinating an organization's planned activities.

15
The process entails quantifying these activities in financial terms, constituting the budgeting
aspect, while simultaneously creating a robust mechanism in instruction to realization of
desired outcomes, which characterizes budgetary control. This research aims to systematically
examine the application of budgeting And budgetary control within government-owned
, ,.

entities, focusing particularly on the Nigerian National Petroleum Corporation (NNPC).

Muyiwa Ezekiel Alade [2007]4, this study challenges the prevailing assumption that tight
budgetary control automatically leads to better output from organisations in the societal and
commercial sectors. It cautions against prematurely concluding that the The ideal degree of
budgetary restraint is reliant on contextual factors.

Edmund Kyei [2007]5 This study concentrations on the impact of the budgets and financial
,

management on the enactment of selected food and beverage companies in Nigeria, which
provide a representative sample of the entire population of firms in the Nigerian production
.

sector. The study recognizes the importance of budgeting and its control mechanisms at both
management and operational levels. Budgeting sets targets and objectives to be achieved,
while budgetary control assesses whether the plans are being realized and implements
corrective measures in cases of deviations or shortfalls.

Pandy [2008]6, Budgeting control involves the development of departmental budgets that
align with the executive's responsibilities and policy objectives. It entails continuously
comparing real outcomes by the planned figures to identify areas requiring corrective actions.
The primary goal of this policy is the making of solid foundation for its periodic revision and
improvement.

Emeka [2009]7 the importance of budgets cannot be underestimated, as they contribute much
to a comprehensive structure of budget control. However, It is crucial to understand that
assessing the budgeting is a just one phase of this system. Merely formulating budgets with
meticulous attention won't result in the anticipated outcomes unless an efficient routine is
established to compare actual outcomes with the budgeted figures. This routine an essential
for analysing the reasons behind any variations and maintaining the company's budgetary
control capacity. Additionally, it facilitates how it is run in various aspects such as global
competition, company recognition, reputation, and development.

Adams and Pandy [2009]8 believes that budgets is a future actions ought to be done in the
whole organization or section thereof. Budget can also be outlined in an accounting report of
the sources (revenues) and uses (expenditure) of fund of the government.

16
It is made ready by the administrator of finance and put before the parliament for discussion
and approval. It is unlawful to spend government fund without the acceptance of the
parliament. The budget is an important economic development which reveals the situation of
14 economy and the expected future trends.

Alan S. Dunk [October 2010]9 At the moment, companies are promoting for increased
oversight of the product innovation process within their budgets. Their major priority is
centred on managing the price of developing new goods while also striving to increase their
financial success by these initiatives. However, there are various problems with current
literature that need to be addressed the potential drawbacks of imposing budgetary constraints.
These concerns highlight that the creative aspects of individuals engaged in product
innovation should not be stifled by worries about costs. Additionally, the implementation of
strict management control systems could be in conflict with the inherently flexible and
exploratory nature of product innovation. There's also a fear that rigid budgets could
potentially hinder the very innovation they aim to foster.

Yakubu S. Abdullahi, [2011]10 A budget is a functional plan developed in anticipation of a

specific time period, outlining the policies and strategies to be pursued in order to achieve
predetermined objectives. Within any organization or institution, budgeting and budgetary
control systems hold a pivotal role in establishing an effective management control
framework that fosters sustainable competitive advantage. This study aimed to investigate the
budgeting practices within Ernest Chemist, a pharmaceutical company located in Ghana. It
sought to understand the perspectives of budgeting experts within the organization and
evaluate their opinions regarding the current condition of company. The research was
conducted through the primary goal of identifying potential solutions for any challenges the
organization may encounter in developing an efficient budgeting and budgetary control
system.

Gökhan Özer & Emine Yılmaz [2011]11 Due to the growing significance of efficient and
productive management within public organizations, the issue of budgetary slack has garnered
increased attention. Addressing this concern, the current study delves into the influence of
several factors, namely the effectiveness of budgetary control, the ethical work climate, and
.

managers' perception of procedural justice, on the tendency to involve in budgetary slack

within public organizations. The study collected data through a survey that was given to 465
managers employed across various public organizations.

17
Siyanbola, Trimisiu Tunji [2013]12 this research investigates the impact of budgeting and
financial management on a production company's performance in Nigeria, using Cadbury.

Nigeria Place as a case study. Given the limited resources available to organizations and the
abundance of wants, companies strive to find ways to achieve their objectives with the
resources at hand.

To accomplish this, firms often employ the concepts of Budgeting and Budgetary control,
,

which enable them to meet their needs at the lowest possible cost while fulfilling their
responsibilities to stakeholders.

In this investigation, a there was use of a descriptive research design and statistics was
gathered by use of surveys administered to respondents. The non-parametric tool of chi-
square analysis was used to analyse the data. The hypotheses were tested at a significance
level of 5%, and the outcomes indicated that budgeting is a valuable tool for evaluating the
.

realization of goals and objectives in firms.

Lawal Babatunde Akeem [2014]13 Budgetary control and budgets serve as forward-looking
,

tools at both managerial and operational tiers, establishing predefined objectives. The
subsequent control aspect evaluates the realization of these objectives, prompting corrective
actions in cases of deviations or inadequacies. This investigation delves into the potential
influence of budget and budgetary control on the enactment of chosen production industries in
.

. Nigeria. The investigation focuses on a representative subset of the complete spectrum of

firms within the Nigerian manufacturing sector

Abubakar, Muhammed Alhaji [2015]14 Budgeting performs a crucial component in the

hospitality industry, where profit maximization is the primary objective. Proper planning And
command over resources are necessary to accomplish this purpose, requiring commitment and
expertise. In Nigeria, the corporate sector predominantly facilitates hotel accommodation,
with a high demand for bookings related to conferences and meetings. Despite rapid growth in
the Nigerian hotel industry over the last decade, it is still believed to be in its infancy.
Consequently, the National Bureau for Statistics (2013), the hotels and restaurant sub-sector
contributes a mere 0.55 percent to the country's Gross Domestic Product (GDP). This
insignificant contribution to the GDP can be attributed to poor budgeting processes and
internal authority over the industry.

Dr. K. Manoharan Nair [2015]15 the research focused on examining the role of Budgets and
budgetary control As crucial management tools within Ghanaian Metropolitan Assemblies.
.

The primary goal was to comprehend the significance attributed by metropolitan, municipal,

18
and regional councils in Ghana to the processes of creating a financial plan and
implementation. Additionally, the study aimed to uncover the benefits and difficulties related
to budgeting, as well as how much money is allocated in variance reports are utilized as
indicators of performance.

Olagunju Adebayo [2016]16 this research delves into the impact of budget control on the
enactment of Dar es Salaam Bank. It aims to achieve three primary objectives: firstly, to
explore the guidance of responsibility accounting on organizational performance; secondly, to
assess whether variance cost analysis has an effect on organizational performance; and
thirdly, to ascertain the effect of zero-based budgeting on administrative enactment.

Balogun, A. [2017]17 the goal of investigation in the societal industry is to determine impact
of budgeting and performance in the government field. To ascertain what works well budgets
control and the problems affecting budgeting and budgetary Control.
.

Alan S. Dunk [2018]18 an thought to choose sustenance and refreshments organizations to

budget also budgeting are ideas traceable of the spiritual text days, decisively the times of
Joseph previously, Egypt.

Williams Abayaawien Atuilik [2019]19 The implementation of budgeting and financial

management in the government industry is widely recognized as an effective tool for
achieving fiscal policy objectives of governments worldwide, including developing countries
in sub-Saharan Africa such as Ghana. While some may view budgeting as a mere ritual, it
actually provides valuable opportunities to enhance service provision and maximize the worth
of allocated resources. Health care, especially in developing countries, is a major problem.
This qualitative study explores practical barriers to budget and financial management in a
,

developing country context, focusing on the health care sector in Ghana. By identifying and
responding to these challenges, There is a chance to leverage systematic budget and budget ,

control, leading to synergistic effects and better service delivery outcomes.

Dokulil. J [2021]20 Superlatives are commonly used to describe traditional budgeting within
managerial accounting techniques. It is frequently used, extensively researched, and heavily
criticized. While academics largely agree on the criticisms of traditional budgeting, there is a
lack of universal assumptions to develop the system. The inconsistent conclusions in existing
literature create a need to explore approaches that mitigate the weaknesses of budgeting.
Furthermore, this incomplete knowledge drives the examination of factors influencing the
choice of these approaches.

19
 CHAPTER-3 -

RESEARCH DESIGN ,

3.1 BUDGETARY CONTROL

This process involves the creation of departmental budgets that align The duties of executives
with policy requirements. It includes the on-going comparison of actual results with budgeted
figures, with the dual purpose of achieving policy objectives through individual actions and
providing a solid foundation for potential policy revisions.

First, budgets are developed and then the real outcomes are compared between the budgeted
and actual figures, which allows the administration to notice the differences and implement
corrective measures in time. Budget control is an on-going process. which helps in planning
and coordination.

TOPIC CHOSEN FOR STUDY

A STUDY ON BUDGETING AND BUDGETARY CONTROL AT A.B INDUSTRY,

- .

BANGALORE

3.2 NEED FOR THE INVESTIGATION

 Budgetary control is an essential tool of business is to maximize profits.

,

 In order to increase earnings, the organisation continually tries to concentrate on

proper Idea, efficient coordination, and tight control.
 Budget delivers as a valuable aid to management through planning, organization and
control.
 It is an instrument which measures the managerial enactment of a company.
 It helps in promoting a feeling of cost consciousness among the employees in the
business.

3.3 SCOPE OF THE STUDY:-

-

 It co-ordinates the events of numerous divisions and roles of budget

 It increases production efficiency and eliminates waste And command over raw
materials
 It aims at increase in earnings their of careful idea and control.

20
3.4 OBJECTIVES OF THE STUDY :-
-

 To understand the budgeting and budgetary control Structure at A.B Industries.

.

 To analyse and compare the variation of budget and actual.

 To know whether there is influence of budgets in profit making or not.
 To advise the effective budgetary mechanism for A.B Industries.

3.5. RESEARCH METHODOLOGY

The research used here empirical research methodologies to analyse performance variances
over years using secondary data and budgeting tools. Annual reports, financial statements,
company profiles, and textbooks providing theoretical background are examples of secondary
sources.

Alternative Hypotheses (H1):

There is a statistically significant difference between budgeted and actual financial

performance indicators at A.B Industries. The company's profitability is positively affected by
the budgetary control system in place.

Null Hypotheses (H0):

There is no statistically significant difference between budgeted and actual financial

performance indicators at A.B Industries. The company's profitability is not influenced by the
budgetary control system in place.

3.6 STATEMENT OF PROBLEM:

A.B Industries makes annual estimates for a variety of costs and revenues. The actual
budgeted statistics never line up with the expected budget. The deviation must be located, and
the cause must be investigated. Calculating monthly feed demand and the overall feed deficit
for each month is necessary due to the wide variance between estimated and real values,
which will result in a contingency.

3.7 LIMITATIONS OF THE STUDY :-

.

Limitations of difficulties faced by me during the survey, something that was Limitations
expected, as am a student with very little practical experience

21
The main difficulties faced by me during the research:-

 The time is very short for me to go deep into vast subject like 'budgetary control".
 The conclusion I have arrived at, are based only on the statistics that was available in
the yearly reports of the organization.
 The study just being a project work and on a dissertation or research, gave me little
scope to cover the whole subject.
 Lastly the research is purely academic. When compared to expert analysis, this
analysis is less accurate due to the lack of expertise.

3.8 CHAPTER SCHEME :-

Chapter- 1: Introduction

 Introduction
 Industry profile & company profile
 Financial statement

Chapter 2-: Conceptual Background and limitations

. -

 Theoretical background of the research

, ,

 Literature review

Chapter 3-: Research Design

 Statement of the problem ,,

 Need for the study Objectives.

-

 Scope of the study

- ,

 Research methodology
 Hypotheses
 Limitation
 Chapter scheme

Chapter 4-: Analysis & Interpretation

 Data analysis, interpretation using pertinent tables and graphs. Included must be the
results of employing statistical techniques.

22
Chapter 05-: Findings, Conclusion, Suggestions

 Summary of findings ,

 Conclusion, suggestions/recommendations.

23
 CHAPTER:-4
DATA ANALYSIS AND INTERPRETATION
- .,

4.1 TABLE SHOWING BALANCESHEET ,

PARTICULAR March March March

2022 (Rs in 2021 (Rs in 2020 (Rs in
lakh) lakh) lakh)

Sources Of Funds
Total Share Capital 18.74 18.74 18.74
Equity Share Capital 10.51 10.51 10.51
Preference Share Capital 8.23 8.23 8.23
Reserves 152.88 141.88 134.99
Net Worth 171.60 160.62 153.73
Secured Loans 252.88 228.82 158.22
Unsecured Loans 7.01 6.19 1.84
Total Debt 280.99 235.01 160.06
Total Liabilities 412.12 395.63 313.79

Application Of Funds
Gross Block 612.12 516.27 418.28
Less: Accum. Depreciation 230.10 210.17 176.65
Net Block 365.80 306.10 241.63
Capital Work in Progress 7.37 7.37 29.47
Investments 0.15 0.15 0.00
Inventories 100 93.35 86.31
Sundry Debtors 130.80 121.80 114.67
Cash @ bank 3.68 2.78 3.16
Total Current Assets 229.90 217.93 204.14
L and A 95.40 81.40 58.79
Total CA, Loans & Advances 312.32 299.33 262.93
Current Liabilities 207.80 206.88 204.72
Provisions 9.44 10.44 15.52
Total CL & Provisions 209.23 217.32 220.24
Net Current Assets 102.02 82.01 42.69
Total Assets 412.12 395.63 313.79

24
4.2 TABLE SHOWING COST OF RAW MATERIAL
, ,

YEAR , BUDGET , ACTUAL , FLEXIBLE , VARIANCE ,

2019-20 1601004 2036549 2472094 435545

2020-21 1869338 1907158 1944978 37820
2021-22 2937672 2017322 2937672 920350

1. GRAPH REPRESENT COST OF RAW MATERIA

RAW MATERIAL COST ,

3500000

3000000

2500000

2000000 BUDGET

1500000 ACTUAL
VARIANCE
1000000

500000

0
2019-20 2020-21 2021-22

INTERPRETATION ,

In the fiscal years 2019-20 to 2021-22, the budget and actual expenditure showed significant
variations, with the highest variance observed in 2021-22 at 920,350 and the lowest in 2020-
21 at 37,820. In 2021-22, the actual expenditure of 2,017,322 fell substantially short of the
budgeted amount of 2,937,672, resulting in the largest negative variance. It indicates that
budgetary control in that year encountered challenges, potentially due to cost overruns or
reduced revenue. Conversely, in 2020-21, the actual expenditure of 1,907,158 was very close
to the budgeted amount of 1,869,338, indicating effective financial control and a minimal
variance.

25
4.3 TABLE SHOWING SELLING VARIABLE COST ,

YEAR BUDGET ACTUAL FLEXIBLE VARIANCE

2019-20 153147 211946 270745 58799
2020-21 193694 201349 209004 7655
2021-22 294241 201404 234241 92837

2. GRAPH REPRESENT SELLING VARIABLE COST ,

SELLING VARIABLE COST ,

350000

300000

250000

200000 BUDGET

150000 ACTUAL
VARIANCE
100000

50000

0
2019-20 2020-21 2021-22

INTERPRETATION

The fiscal year 2021-22 stands out with the highest budget of 294,241 and a significant
variance of 92,837 compared to the actual spending of 201,404. This substantial negative
variance suggests that expenditure in that year fell considerably short of what had been
budgeted, potentially indicating overspending or unexpected financial challenges. In contrast,,
the fiscal year 2019-20 had the lowest budget of 153,147 and the smallest variance, with
actual spending reaching 211,946. This indicates that in 2019-20, the organization managed to
spend significantly more efficiently than anticipated, resulting in a surplus of 58,799.

26
4.4 TABLE SHOWING EMPLOYEE COST FIXED

YEAR BUDGET ACTUAL FLEXIBLE VARIANCE

2019-20 150147 248623 347099 98476
2020-21 193228 236192 279156 42964
2021-22 406309 228665 236309 177644

3. GRAPH REPRESENT EMPLOYEE FIXED COST ,

EMPLOYEE COST FIXED ,

450000
400000
350000
300000
250000 BUDGET
200000 ACTUAL
150000 VARIANCE
100000
50000
0
2019-20 2020-21 2021-22

INTERPRETATION

The years 2019-20, 2020-21, and 2021-22, we observe significant variances between the
budgeted and actual figures. The year 2019-20 stands out with the highest variance of 98,476
units, indicating that the actual expenditure exceeded the budgeted amount by a substantial
margin. This could be a cause for concern, as it suggests potential budgetary oversights or
unexpected expenses during that fiscal year. But on the other hand, in 2020-21, the variance
of 42,964 units is relatively smaller, but it still signifies that the actual expenses exceeded the
budget. In contrast, in 2021-22, we see the lowest variance of 177,644 units, indicating that
the organization managed to bring its actual expenditure much closer to the budgeted amount,
which is a positive sign of improved financial control and management.

27
4.5 TABLE SHOWING MANUFACTURING FIXED OVERHEAD,

YEAR BUDGET ACTUAL FLEXIBLE VARIANCE

2019-20 106603 143373 180143 36770
2020-21 118154 136204 154254 18050
2021-22 229705 117560 129705 112145

4. GRAPH REPRESENT MANUFACTURING FIXED OVERHEAD ,

MANUFACTURING FIXED OVERHEAD ,

250000

200000

150000 BUDGET
ACTUAL
100000
VARIANCE
50000

0
2019-20 2020-21 2021-22

INTERPRETATION

The years 2019-20 to 2021-22 reveal significant variances. In 2021-22, the budget was the
highest at 229,705, but the actual expenditure was substantially lower at 117,560, resulting in
a considerable negative variance of 112,145. This suggests that the organization overshot its
budgeted spending by a substantial margin, indicating a potential issue with budgetary control
or cost management. Conversely, in 2019-20, the budget was the lowest at 106,603, but the
actual expenditure exceeded it significantly at 143,373, indicating a positive variance of
36,770.

28
4.6 TABLE SHOWING SELLING FIXED OVERHEAD ,

YEAR BUDGET ACTUAL FLEXIBLE VARIANCE

2019-20 24714 37536 50358 12822
2020-21 30848 35659 40470 4811
2021-22 46982 32875 36982 14107

5. GRAPH REPRESENT SELLING FIXED OVERHEAD .

SELLING FIXED OVERHEAD .

50000
45000
40000
35000
30000 BUDGET
25000
ACTUAL
20000
15000 VARIANCE
10000
5000
0
2019-20 2020-21 2021-22

INTERPRETATION

In the fiscal years 2019-20 and 2021-22, the organization experienced significant variances
between budgeted and actual expenses, with variances of 12,822 and 14,107 units,
respectively. In 2019-20, the actual expenses exceeded the budget by 12,822 units, indicating
a lack of cost control and possibly unforeseen expenditures. Conversely, in 2021-22, the
actual expenses fell short of the budget by 14,107 units, suggesting efficient cost management
or unexpected revenue inflows. On the other hand, in 2020-21, the variance was relatively
small at 4,811 units, indicating a closer alignment between budgeted and actual expenses.

29
4.7 TABLE SHOWING ADMIN FIX OVERHEAD ,

YEAR BUDGET ACTUAL FLEXIBLE VARIANCES

2019-2O 74689 121456 168223 46767
2020-21 98307 115383 132459 17076
2021-22 221925 101962 119963

6. GRAPH REPRESENT ADMINISTRATIVE FIXED OVERHEAD ,

ADMIN FIX OVERHEAD ,

250000

200000

150000 BUDGET
ACTUAL
100000
VARIANCE
50000

0
2019-2O 2020-21 2021-22

INTERPRETATION

The years 2019-20, 2020-21, and 2021-22 reveals significant variances between the budgeted
and actual figures. In 2019-20, the actual expenditure far exceeded the budgeted amount by a
substantial margin of 46,767, indicating potential financial mismanagement or unexpected
expenses. Conversely, in 2020-21, the actual spending was notably lower than the budget by
17,076, suggesting efficient cost control or an under spending situation. The year 2021-22
presents an intriguing scenario as the actual expenditure of 101,962 is considerably lower than
the budgeted amount of 221,925, indicating either prudent financial management or potential
cutbacks in planned expenditures.

30
INTERPRETATION AND ANALYSIS

4.8 TABLE SHOWING RELIABILITY TEST

Cases N Percent
Valid 3 100.0%
Excluded 0 .0%
Total 3 100.0%

Reliability Statistics

Cronbach’s Alpha N of Items

.93 5

INTERPRETATION

Analysis: Reliability is a measure of the consistency and stability of a group of measurements

or items. In this case, Cronbach's Alpha was worked as the reliability statistic.

A measure of Cronbach's Alpha is 0.93. Cronbach's Alpha is a measure of internal

consistency, and it indicates how closely related a group of items are as a group. In this
context, a value of 0.93 suggests a high degree of internal consistency among the items in the
scale.

Interpretation: This reliability test indicates that the measurement instrument or scale being
assessed has a high level of internal consistency, with a Cronbach's Alpha of 0.93. This
suggests that the items in the scale are strongly related to each other and may be considered
reliable for measuring the construct of interest.

Recommendation: The measurement instrument or scale under assessment has demonstrated

a high level of internal consistency with a Cronbach's Alpha value of 0.93. This suggests that
it is a reliable instrument for measuring the construct of interest. Consequently, it is advised
for use in research or assessment where this construct needs to be measured.

31
 The reliability test using Cronbach's Alpha with a value of 0.93 suggests that the scale or
instrument being assessed is highly reliable. This means that the items in the scale are closely
related and consistently measure the same construct, making it a robust tool for measuring the
intended psychological or behavioral traits. Researchers can have a high level of confidence
in the internal consistency of this scale when using it for data collection and analysis.

4.9 NORMALITY TEST

NPAR TEST

ONE-SAMPLE KOLMOGOROV-SMIRNOV TEST

RAW Selling Employ . Manufacturing Selling Administrative

Material Variable ee Fixed Fixed Fixed
Cost . Cost, Fixed Overhead , Over. Overhead ,

Cost head
N 3 3 3 3 3 3

Normal Mean 464571.7 53097.00 106361.3 55655.00 10580.00 61268.67

Parameters Std. 441980.4 42876.31 67685.37 49809.13 5037.24 52954.30

Deviation

Most Extreme Absolute .19 .22 .21 .31 .34 .27

Differences Positive .19 .19 .21 .31 .24 .27

Negative -.18 -.22 -.19 -.23 -.34 -.20

Kolmogorov-Smirnov Z .33 .38 .37 .54 .59 .48

Asymp. Sig. (2-tailed) 1.000 .999 .999 .928 .882 .977

The interpretation of the Kolmogorov-Smirnov test results is as follows:

 A p-value greater than 0.05 means that we cannot reject the H0 that the variable is
normally distributed.

 A p-value lower than 0.05 means we are capable reject H0 the and conclude that the
variable is not normally distributed.

In this case, The Raw material Kolmogorov-Smirnov Z statistic is 0.33, and the p-value is
1.000. With a p-value of 1.000 which is greater than the typical significance level of 0.05.
Therefore, we are able to not reject the null hypothesis. This suggests that the "Raw Material
Cost" variable is normal distributed.

32
Selling variable cost p-value (0.999) is greater than 0.05, this means that we fail to reject the
H0 for the "Selling Variable Cost" variable. It appears to be reasonably normally distributed.

Employee fixed cost p-value (0.999) is greater than 0.05, indicating that the "Employee Fixed
Cost" variable is nothing radically different from a normal distribution.

Manufacturing fixed overhead p-value is 0.928, which is much greater than 0.05. Thus, we are
unable to reject the null hypothesis. This suggests that the "Manufacturing fixed overhead" is
normal distributed.

Selling fixed overhead p-value (0.882) is also greater than 0.05, indicating that the "Selling
Fixed Overhead" variable is not significantly different from a normal distribution.

Administrative fixed overhead p-value (0.977) is greater than 0.05, this means that we cannot
reject the H0. This suggests that the "Administrative fixed overhead" is normal distributed.

Considering the results of the one-sample Kolmogorov-Smirnov test, there is no strong proof
indicating to any of the six variables significantly deviate from a normal distribution at the
typical significance level of 0.05. Therefore, it is rational to assume these factors are related
approximately normal distributions for the purposes of statistical analysis.

33
4.10 DESCRIPTIVES TEST

Descriptive Statistics

N Mean Std Dev.

Raw Material Cost . 3 464571.7 441980.4

Selling Variable Cost 3 53097.00 42876.31
Employee Fixed 3 106361.3 67685.37
Cost
.

Manufacturing Fixed 3 55655.00 49809.13

Overhead .

Selling Fixed Over 3 10580.00 5037.24

head
,

Administrative Fixed 3 61268.67 52954.30

Overhead ,

Valid N (list wise) 3

Missing N (list wise) 0

Raw material cost: On average, the company spends approximately 464,571.70 on raw
materials, with a relatively high degree of variability as indicated by the large S.D of
441,980.40. This suggests that the Raw material prices can vary substantially from one
observation to another within the dataset.

Selling variable cost: On average, the company incurs variable selling costs of approximately
53,097.00. Similar to raw material costs, additionally, there is notable degree of variability in
these costs, with a S.D of 42,876.31.

Employee fixed cost: The average employee fixed cost for the company is approximately
106,361.30. These price also exhibit variability, with a S.D of 67,685.37. This suggests that
the company's expenditure on employee fixed values can vary substantially across
observations.

Manufacturing fixed overhead: The mean manufacturing fixed overhead cost is

approximately 55,655.00, and exists a moderate degree of variability in these costs, with a
standard deviation of 49,809.13.

Selling fixed overhead: The average selling fixed overhead cost is around 10,580.00. These
costs have a limited range of variation, with a standard deviation of 5,037.24, indicating that
they tend to be more consistent compared to other cost categories.

34
Administrative fixed overhead: The Company’s administrative fixed overhead costs have an
average of approximately 61,268.67. These costs also exhibit a notable degree of variability,
with a standard deviation of 52,954.30.

Overall, these descriptive statistics provide an overview of the company's costs in various
categories, highlighting the average expenditure and the degree of variability for each
category. The interpretation can guide further analysis and decision-making related to cost
management and budgeting within the organization.

Here are some particular recommendations for the company:

 Regularly conduct variance analysis to compare real price with planed or expected
costs. Investigate significant variances and take corrective actions as needed.
 Since selling fixed overhead costs are relatively consistent, continue with the current
management practices. Focus on efficiency and cost control to maintain this stability.
 Consider negotiating with suppliers for bulk discounts or long-term contracts to
stabilize costs.

35
 4.11 TABLE SHOWING CORRELATION TEST

RAW Selling Employ Manufactu Selling Administrat

Mat Variab ee ring Fixed ive
PARTICULAR eria le Cost Fixed Fixed Over Fixed
l Cost Overh head Overhea
Cos ead d
t
RAW Pearson 1.000
Material Cost Correlatio
n
Sing.(2-
tailed)
N 3
Selling Pearson .985 1.000
Variable Correlatio
Cost
n
Sing.(2- .110
tailed)
N 3 3
Employee Pearson .999 .977 1.000
Fixed Cost Correlatio
n
Sing.(2- .028 .138
tailed)
N 3 3 3
Manufacturi Pearson .962 .900 .973 1.000
ng Fixed Correlatio
Overhead
n
Sing.(2- .177 .286 .149
tailed)
N 3 3 3 3
Selling Fixed Pearson .899 .961 .879 .745 1.000
Over head Correlatio
n
Sing.(2- .288 .178 .316 .465
tailed)
N 3 3 3 3 3
Administrati Pearson .983 .938 .990 .995 .805 1.000
ve Fixed Correlatio
Overhead
n
Sing.(2- .116 .226 .088 .061 .404
tailed)
N 3 3 3 3 3 3

36
INTERPRETATION ON CORRELATION:

Raw Material Cost vs. Other Costs:

Raw Material Cost has a perfect strongly correlated with itself (1.000), which is expected
since its being compared to itself.
Raw Material Cost has a high positive correlation with Selling Variable Cost (.985), which
- .

suggests that as raw material costs increase, selling variable costs also tend to increase. This
makes sense as higher material costs can lead to higher variable costs.
Selling Variable Cost vs. Other Costs:
Selling Variable Cost also has a high positive correlation with Raw material Cost (.985), as
, -

explained above. It has a high positive correlation with Employee Fixed Cost (.977),
-

suggesting that as selling variable costs increase, employee fixed costs also tend to increase. It
has a strong positive correlation with Administrative Fixed Overhead (.938), indicating that as
,.

variable selling costs go up, administrative fixed overhead costs tend to increase.
Employee Fixed Cost vs. Other Costs:
Employee Fixed Cost has a very strong positive correlation with Raw Material Cost (.999)
.

and Selling Variable Cost (.977). These findings imply that modifications in employee fixed
costs are closely connected to variations in raw material costs and selling variable costs.
Manufacturing Fixed Overhead vs. Other Costs:
Manufacturing Fixed Overhead has strong positive correlations with Raw Material Cost
.

(.962) and Selling Variable Cost (.900). This indicates that as raw material costs and selling
variable costs increase, manufacturing fixed overhead costs tend to rise.
It has a weaker positive correlation with Employee Fixed Cost (.973) but still substantially,
+ .

advising that changes in manufacturing fixed overhead are connected to modifications in

employee fixed costs.
Selling Fixed Overhead vs. Other Costs:
Selling Fixed Overhead has strong positive correlations with Raw Material Cost (.899),
.

Selling Variable Cost (.961), and Employee Fixed Cost (.879). These correlations advise that
.

modifications in selling fixed overhead expenses are connected to changes in these other cost
components. It has a weaker positive correlation with Manufacturing Fixed Overhead (.745),
- .

indicating a somewhat less strong relationship b/w these two variables.

Administrative Fixed Overhead vs. Other Costs:
Administrative Fixed Overhead has very strong positive correlations with Raw Material Cost
.

(.983), Selling Variable Cost (.938), Employee Fixed Cost (.990), Manufacturing Fixed
Overhead (.995), and Selling Fixed Overhead (.805). These strong correlations advise that
administrative fixed overhead costs are closely related to all these cost components.

37
Here are some specific recommendations for the company:
.

 Implementing strategies to control or optimize raw material expenses can help control
variable selling costs and improve profitability.
 The high positive correlation b/w Selling Variable Cost and Employee Fixed Cost
(.977) suggests that changes in variable selling costs tend to impact employee fixed
costs. Consider analysing the reasons behind this correlation to ensure that staffing
levels and compensation structures are appropriately aligned with sales fluctuations.
 Monitor staffing levels and labour costs to optimize manufacturing overhead without
compromising productivity.

38
 5.1 FINDINGS

 The company appears to have good control over raw material costs, as the variances
are favorable, especially in 2021-22.
 Selling variable costs have been managed effectively, with favorable variances in all
years, particularly in 2021-22.
 Employee fixed costs had the most favorable variance in 2021-22, indicating effective
management.
 Manufacturing fixed overheads were unfavorable in the first two years but became
favorable in 2021-22, suggesting improved control.
 Selling fixed overhead costs have consistently shown favorable variances, with 2021-
22 being the most favorable.
 While 2019-20 saw an adverse variance, both 2020-21 and 2021-22 showed favorable
variances, indicating better cost control.
 Raw material costs have strong positive correlations with various cost components,
.

highlighting the importance of managing these costs efficiently to control overall

expenses.
 Selling variable costs have strong positive correlations with raw material costs,
.

employee fixed costs, and administrative fixed overheads. This indicates that changes
in selling variable costs influence other cost components, emphasizing the need for
coordinated cost management.
 Employee fixed costs have very strong positive correlations with raw material costs
,

and selling variable costs, underlining the interdependence of labor costs and
production inputs.
 Manufacturing fixed overheads have strong positive correlations with raw material
.

costs and selling variable costs, suggesting that fluctuations in these costs impact
manufacturing overheads.
 Selling fixed overhead costs show strong positive correlations with raw material costs,
.

selling variable costs, and employee fixed costs. Effective management of these
variables is essential for controlling selling overheads.
 Administrative fixed overheads have very strong positive correlations with all cost
,

components, highlighting their influence on overall expenses.

 The company's budgetary control system appear to be effective, with favorable
variances in several cost components, especially in the most recent year, 2021-22.
 Managing raw material costs is crucial, given their strong positive correlations with other
.

cost components.

39
 Employee costs play a substantial role in the budgetary process, and their management
has improved over time.
 Administrative fixed overheads require careful monitoring to avoid adverse variances.
 Selling variable costs have a notable impact on overall costs and profitability, so
strategies to control them are vital.
 The company's Fiscal efficiency has increased over the years, with more favorable
variances in recent years, indicating better budgetary control and cost management.

40
5.2 SUGGESTIONS

Listed below are some recommendations based on the research results to improve various
aspects of the company's budgetary control:

 Maintain a focus on controlling and optimizing raw material costs, as they have a
significant impact on overall expenses. Regularly evaluate suppliers and explore cost-
saving opportunities.
 Given the positive management of selling variable costs, continue implementing
strategies to control and reduce these costs further. This includes optimizing pricing,
distribution, and sales channels.
 Build upon the favorable variance in employee fixed costs by implementing efficient
workforce planning, productivity improvement initiatives, and competitive
compensation structures. Ensure that staffing levels align with production needs.
 Continue the trend of improved control over manufacturing fixed overheads. Explore
process optimization, automation, and inventory management to maintain cost
efficiency.
 Invest in training and development programs to enhance employees' financial acumen,
budgeting skills, and cost management capabilities.
 Explore the integration of technology solutions such as cost management software,
analytics tools, and enterprise resource planning (ERP) systems to streamline
budgeting
 Continue to perform detailed variance analyses to understand the drivers of budget
deviations. Identify root causes and take corrective actions promptly.
 Evaluate and refine budgetary mechanisms to ensure they reflect current market
conditions and the company's strategic goals. This might involve more dynamic or
rolling budgets that adapt to changing circumstances.
 Conduct a thorough profitability analysis to identify the most profitable products,
customer segments, or geographic regions. Allocate resources accordingly to
maximize returns.
 Implement a system of regular budget reviews to ensure budgets remain aligned with
the company's evolving business landscape.

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5.3 CONCLUSION

The findings and suggestions provided offer valuable insights into the budgeting and
budgetary control practices at A.B Industries, Bangalore. These insights underscore the
company's strengths in certain areas and highlight opportunities for improvement in others.
The company has demonstrated effective control over raw material costs, selling variable
costs, and employee fixed costs, particularly in the most recent year, 2021-22. Manufacturing
fixed overheads and selling fixed overhead costs have also shown favorable variances,
indicating improved control. These positive trends reflect the company's commitment to
budgetary discipline and cost management. Furthermore, the strong positive correlations.
observed among various cost components emphasize the interconnected nature of cost
management within the organization. This underscores the integration of actions throughout
departments to optimize cost structures and enhance profitability.

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 BIBLOGRAPHY

 M Pandey – Financial management, Vikas Publishing house Pvt.Ltd.

 Prasanna Chandra - Fundamental of financial management.
 M.Y. Khan and P.K. Jain – Financial Management, Vikas Publishing
house ltd, New Delhi.
 Satishnamdar – Principles of Financial Management, Everest Publishing
house.
 Annual reports of A.B Industries, Bangalore.
.

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