Fundamentals of Cost Control and Budget Preparation

Introduction:

Effective company planning and management of controllable operations are crucial for contemporary businesses. The Fundamentals of Cost Control and Budget Preparation course focuses on forward-looking principles to achieve efficient short-term planning and performance review, specifically through budgets and budgetary control. Understanding the budget preparation process and its methods, including cost estimation and prediction, is essential for cost management and control. The course emphasizes the use of flexed budgets for variance analysis and timely remedial actions.

Objectives:

At the end of the Fundamentals of Cost Control and Budget Preparation course, participants will be able to:

• Develop an integrated planning and reporting system, including budget preparation.
• Apply organizational skills in budgeting and budget preparation processes.
• Understand cost dynamics and manage costs effectively.
• Proficiently use both traditional and innovative budgeting techniques.
• Implement effective performance appraisal mechanisms with suitable indicators.

Training Methodology:

• Case Studies
• Interactive Workshops
• Group Discussions
• Simulations

Course Outline:

Unit 1: Management Control

• Setting, participation, and control of budget targets
• Management control systems, strategic planning, and budgeting
• Objectives of planning and control: resource allocation and responsibility centers
• Managerial control components and management accounting systems
• Benefits and challenges of budgeting
• Budgeting strategies for the organization

Unit 2: Budgeting and Cost Control

• Steps in the budgeting process
• Types of budgets: incremental and zero-based
• Budget preparation: operating and cash budgets
• Cost variances: variable vs. fixed operational expenses
• Product profitability analysis and decision-making based on contribution margin
• Cost, volume, and profit relationship

Unit 3: Traditional and Activity-Based Costing and Budgeting

• Understanding activities and costs
• Product costs, period costs, direct and indirect costs
• Internal costing, cost management, and overhead costing
• Cross-subsidization and activity-based costing
• Budgets based on activities, resources, and cost drivers
• Budgetary control, standard costing, flexed budgets, and variance analysis

Unit 4: Capital Budgeting

• Types of costs: initial capital investment and annual operating cost
• Average rate of return and investment payback criteria
• Cash flow valuation: Discounted Cash Flow (DCF) and Net Present Value (NPV)
• Determination of cost of equity, cost of debt, and WACC
• Return on invested capital, internal rate of return (IRR/MIRR), and discounted payback
• Capital rationing and profitability index (PI)

Unit 5: Financial and Non-Financial KPIs Relationship

• Targeting top performance
• Financial value creation and strategic management
• Changes in cost structures and payment methods
• Accounting measures and performance evaluation
• Combining financial and operational performance indicators (KPIs)
• The balanced scorecard