Accounting

Budgetary Control And Responsibility Accounting

Budgetary Control and Responsibility Accounting:In some previous blog posts we have discussed the establishment and use of one factory wide predetermined overhead rate, the accumulation of actual factory overhead in books and records, and the analysis of the over or under-applied factory overhead. These phases are now expanded through the use of predetermined departmental factory overhead rates to improve the charging of overhead to jobs and products which to lead to discussion on the budgetary control and responsibility accounting, cost control via responsibility accounting, and to provide data useful for analytical and decision-making processes.

Methods for the control of materials and labor costs are discussed in other posts. However, because each product manufactured requires a certain minimum amount of materials and labor, there is a limit to the amount of cost reduction for materials and labor which can be realized through the use of such controls.The emergence of responsibility accounting is now ensured which established a relationship between Budgetary Control and Responsibility Accounting .

The situation is different for factory overhead ; the tighter the control over such expenses, the better the possibility for reducing them. The departmentalization of factory overhead facilitates this responsibility control (responsibility accounting) which is so necessary if unit and total costs are to stay within predetermined or budgeted ranges. The departmentalization of overhead costs in non-manufacturing businesses and in nonprofit organizations will also be discussed in some later posts.

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