Describe the benefits to an organization of preparing an operating budget
What will be an ideal response?
A well-prepared operating budget should serve as a guide for a company to follow during the budgeted period. It is not "set in stone." If new information or opportunities arise, the budget should be adjusted.
A well-prepared operating budget assists management with the allocation of scarce resources. It can help management see trouble spots in advance, and decide where to allocate its limited resources.
A well-prepared operating budget fosters communication and coordination among various segments of the company. The process of preparing a budget requires managers from different functional areas to work together and to communicate performance levels they both want and can attain.
A well-prepared operating budget can become the performance standard against which firms can compare the actual results.
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