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Horngren's Cost Accounting 17th Edition

Horngren's Cost Accounting (17th Edition)

Book Edition17th Edition
Author(s)Datar, Rajan

Chapter 6, End of Chapter, Questions, Exercise 6-1

Page 227

Here is a tip:

Budget is a plan made by the company in advance in order to evaluate the actual results.


Budgeting is a process of designing and implementing the budgets in an organization. The following are the elements of budgeting cycle: 

  • The first element includes planning the performance of the company based on what is expected. This planning is generally done with the agreement of the management.
  • The second element includes measuring the actual performance against the planned results or the budget.
  • The third element includes the investigation of variations that occur between the actual results and the expected results.
  • The fourth element includes planning the operations as per the feedback received and making modifications based on the changed circumstances.

Verified Answer

The Four elements are:

  • Performance planning of the whole company and its subunits, which is in consensus with the management.
  • Providing a reference through which comparison can be made.
  • Evaluating variations and taking corrective actions.
  • Planning again under new conditions.
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