Question

Session 7 Application Exercise Please read the following and submit a minimum 150 word commentary at title link above: Chapter 16 details Financial Planning and Control. Please answer the following related questions: Which is more important-planning or controlling? How are they different? What is a break-even point? How is an planning and control similar to your personal budget process?

Answer 1

Planning and controlling both are important. Both these two management functions are interred related to each other and go hand in hand. Planning helps in setting the targets for the organisation whereas Controlling helps in checking whether actual is as per plan or not. Controlling cannot be done if there is no plan and Controlling provides a sound basis for future plans based on deviations. Thus both are inter related to each other .Usually it is Planning first and then Controlling .Both are future oriented and helps the organisation in achieving its goals and objectives.

A Break even point is a point at where there is no profit and no loss for the organization. At Break even point the fixed cost is equal to the contribution (Sales – Variable cost). Break even point is an important Cost volume profit (CVP) analysis tool needed for the management. It helps the firm in reliable decision making like product launches, evaluation of new investments, product profitability etc. It is an important managerial accounting technique needed in today’s competitive world.

Our Personal Budget also involves Planning, Say planning for education courses, purchase a car or bike or even plan a budget for day to day requirements like shopping, watching movies, etc . We need to plan for our personal expenses and see whether our actual spend is in line with the planning done. Similarly organisation also plan for the revenue, expenditure and control the actual spends to achieve the targets set for the organization