According to Jensen (2001), “Corporate budgeting is a joke and everyone knows it. It consumes a huge amount of executives' time, forcing them into endless rounds of dull meetings and tense...

Relevance of traditional budgeting and standard costing in the contemporary business environment
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Relevance of traditional budgeting and standard costing in the contemporary business environment
Introduction
In the cu
ent business environment, the companies faces intense competition and the companies focus on various aspects like cost practices, budgeting and other information which helps in decision making,
Corporate budgeting is one of the aspects which is highly used by the companies. Incorporating budgeting is not easy for the organizations as it requires lot of time of the executives and negotiations between the employees and the managers. Because of the budgeting, some of the managers also tend to manipulate the results so that the results are able to match up with the budgets. It also creates grudges between the employees and also lead to distorted results. As given in the case study, so as to meet the target, the sales team shipped unfinished goods to the employees so as to record the sales and earn the bonus, and the company then had to a
ange for the warehouse as well as the additional labor to get the goods finished. This lead to the decrease in the overall profit of the company because of the additional costs that the company took to finish their unfinished goods. These kind of decisions do lead to the distorted decisions.
As per Jensen, (2001), ‘Traditional budgeting process is merely waste of time which leads to distorted decisions and turn honest managers intro schemers. It doesn’t have to be the way – if you’re willing to sever the ties between budgets and compensation”.
Standard Costing
Standard costing is the costing where the company sets the standard for each operations and then compare the actual performance of the company with the standard performance of the company. The standard costing also focus on analysing and reporting the variances which has been the result of the standard and the actual performance and then the variance is investigated.
The standard costing is suited for the organization which has repetitive activities, majorly by the manufacturing companies which has repetitive production process. Standard costing does not apply on the non-repetitive activities or the company indulged in non-repetitive activities.
Standard costing has been criticized over the period of time, and has been said to be inflexible, motivating extra production and also failing to provide meaningful information on the timely basis. Many people have termed standard costing as an outdated process and technique.
Few authors have also argued and said that traditional standard costing and variance analyses fail to provide relevant information on costs, which changes with the change in the number of goods produced. Traditional standard costing and variance analyses have stated to have severe limitations when used to analyze overhead costs. As the importance of the overhead costs increases, the limitations related to the standard costing as well as variance costing increased.
Traditional Budgeting
Budgets have played a major role over a period of time and has been an important part of the business environment since 1920 and has always been considered as key driver and evaluators of the managerial performance of the business and also an important part for the planning and control.
Budget are the tools which can help the company in developing different financial plans which can help in obtaining different results and also focus on obtaining and facilitating the control environment as well as improved management policies. (Don R. Hansen and Maryanne M. Mowen, 2002)
It has been a tool which has helped in analysing the financial performance of the company as well as the performance of different departments, divisions as well as individuals. With the budgeting, the company has a strong...