Performance Budget Evaluation

The performance budget evaluation takes into account the company’s usage of the budget for a particular sales year. This is done so that the performance is measured in terms of sales against the budget that has been set. Generally, a company creates a budget based on the capital that it has and use it for a certain product. The budget encompasses production, finishing, packaging, branding and ultimately selling. The efficiency of the company is seen when it is able to stick to the budget. When it exceeds and crosses the budget, corrective measures need to be taken.

The evaluation helps the company understand whether the sales performance has or has not exceeded this budget. It is important that the data collected and compiled are accurate. It is also necessary to note that the evaluation will help companies formulate back strategies or exit plans for when there is a loss of control of the budget.

Sample Performance Budget Evaluation:

The VANGYT Soap Ltd. Has recently launched a new soap product into the market. This evaluation seeks to measure the sales revenue generated against the budget that was set initially by the company.

Budget Details:

  • Initial Capital used: $3.4 million
  • Working Capital: $1 million
  • Finishing Capital: $1 million
  • Packaging and Marketing: $3 million
  • Total budget allocated for the project:$ 9 million

The company has been able to save $400,000 for the production of the soap product called VANITY Rose

The sales Performance:

  • The product was released on 7th July 2011
  • The initial revenue generated was $1 million for the first quarter
  • There was a slump which reduced to income by 2.3%
  • However, in the last 6 months this product has shown a sales income of $7 million

The company is likely to earn revenue of over 4.4% more than the budget in the coming quarter.

Category: Performance Evaluation

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