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 20 35
Promotion 5 10 15
Other marketing 10 _ 10
40 60 100
The sales were budgeted at RS. 1000 lakhs and the quarterly break-up of the
budgeted sales is,

Quarter budgeted, 1. RS. 160 lakhs ACTUAL , RS. 200 lakhs

2. RS. 240 lakhs RS. 180 lakhs
3. RS. 280 lakhs RS. 220 lakhs
4. RS. 320 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 Moderate Optimistic

sales@ RS.10/unit 500 700 800

Variable cost
Manufacturing RS.5.10/unit

255 RS. 5 350 RS.4.80 384

MARKETING 25 35 40
@0.50/UNIT
MARGINAL COST 280 385 424

MAR. 220 315 376

CONTRIBUTION
FIXED COST

MANUFACTURING 100 100 100

MARKETING 20 20 20
Administrative 10 130 10 130 10 130
NIbt 90 185 246
tax@50% 45 92.5 123
NIat 45 92.5 123
• 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.