ACCA PM Syllabus D. Budgeting And Control - Information Used in Budget Systems - Notes ^{5 / 10}

Past data may be used as a starting point for the preparation of budgets but other information from a wide variety of sources will also be used.

Each function of the organisation will be required to estimate revenue and expenditure for the budget period. For example, marketing, personnel and research and development.

The main sources of information for budgeting purposes are

1. Previous year’s actual results.

2. Other internal sources which may include manager’s knowledge.

3. Long-term requirements of individual customers, etc.

4. Estimates of costs of new products using work study techniques, technical estimates from research and development, etc.

5. Statistical techniques such as linear regression may help to forecast sales. EOQ may be used to forecast optimal inventory levels.

6. External sources of information may include suppliers' price lists, estimates of inflation and exchange rate movements, strategic analysis of the economic environment. Senior managers may incorporate assumptions concerning competitor actions based on the analysis of the market.