Question

Define the key favtors in budgeting in management accounting

Answer 1

Explanation:

A key factor (limiting factor, principal budget factor, or governing factor) is the most important factor in the context of budgetary control which limits or governs the whole process of preparation of budgets.

The examples of key factor, which can be one or even more than one in catering establishments, are indicated below:

Sales volume: This key factor may limit the volume of sales and makes further expansion of sales because of the restricted demand in the market or limited efforts for sales promotion.

Seating capacity: This is the most potent limiting factor operating in restaurants and similar catering establishments.

Management policy: This might be a key factor because of deficiency of capable managers or limited funds at the disposal of executives.

Materials: This may be the limiting factor on account of inadequate availability of supply.

Labor: This may be the key factor because there might be a dearth of workers in general or in certain grades. It is, therefore, necessary to consider what possible key factors may influence the business operation before preparing the budgets.