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What is the primary purpose of budgeting in management accounting?

Practice Questions

Q1
What is the primary purpose of budgeting in management accounting?
  1. To increase sales revenue
  2. To control costs and allocate resources
  3. To determine product pricing
  4. To assess employee performance

Questions & Step-by-Step Solutions

What is the primary purpose of budgeting in management accounting?
  • Step 1: Understand that budgeting is a plan for how to spend money.
  • Step 2: Recognize that budgeting helps managers keep track of costs.
  • Step 3: Learn that budgeting allows managers to allocate resources, like money and time, to different areas of the organization.
  • Step 4: Realize that by following a budget, an organization can avoid overspending.
  • Step 5: Conclude that the primary purpose of budgeting is to ensure the organization operates within its financial means.
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