Budgetary Control In Marketing

4. FLEXIBLE BUDGETING • flexible budgeting system attempts to develop series of budgets for various levels of activity and under varying sets of assumptions. • Marketing budgets could be framed on a more realistic basis and their control made more meaningful and effective with the help of the concept of flexible budgeting • Specially used for marketing expense budgets

Functional allocations Fixed

Variable

Total

Direct selling

10

30

40

Distribution

15 5 10

20 10 _

35 15 10

40

60

100

Promotion Other marketing

The sales were budgeted at RS. 1000 lakhs and the quarterly break-up of the budgeted sales is, Quarter budgeted,

1. 2. 3. 4.

RS. 160 lakhs RS. 240 lakhs RS. 280 lakhs RS. 320 lakhs

ACTUAL , RS. 200 lakhs RS. 180 lakhs RS. 220 lakhs RS. 400 lakhs

5. ADMINSTERATION OF BUDGETRY CONTROL SYSTEM • reasonably good but ill-structured or wrongly implemented • Developing the budget as well as braking this up in to departmental / section wise details and also for shorter period • Continues comparison at regular periodic intervals like monthly, quarterly, half yearly. • pinpointing the points which are adverse in nature and higher in magnitude. • Analysing the reasons for the divergence so pinpointed.

• Initiating remedial measure, again through the active involvement of the operating people in order to correct the adverse divergence in the immediate next time period. • If any major divergence, whether favorable or adverse, is found to be beyond control during the budget period, then working out a rational basis for a revising the budget itself

6. PROBABLITY CONCEPT IN BUDGETING

• Budgeting in marketing area can be more meaningful if the elementary concepts of statically probability theory are introduced in the budgeting system.

6. Probability CONCEPT IN BUDGETING Pessimistic sales@ RS.10/unit 500

Variable cost

Moderate

Optimistic

700

800

Manufacturing RS.5.10/unit

255 RS. 5

350 RS.4.80

384

25

35

40

MARGINAL COST 280

385

424

MAR. CONTRIBUTION

220

315

376

MANUFACTURING 100

100

100

MARKETING @0.50/UNIT

FIXED COST

MARKETING

20

Administrative

10 130

NIbt tax@50% NIat

90 45 45

20 10 130 185 92.5 92.5

20 10 130 246 123 123

• In this case the two imp. Variables in the budget are the volume of sales and the estimates of variable expanses. We may assign probabilities to the pessimistic, moderate an optimistic estimates on the basis of our past exp. And future expectations.