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Budgets - Determining the Factor that Restricts Performance.
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| Submitted: Mon Apr 05 2004
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Determining the Factor that Restricts Performance This is an important stage, which must be taken into account when going through the budgeting process. In fact McLane and Atrill 1999 comment that "it is the limiting factor which will determine the overall level of activity for the business". In every organisation there is some factor that restricts performance for a given period. Examples of these factors could be the production capacity, which would restrict performance when sales demand is in excess of available capacity. Another more common example which would restrict the performance of an organisation is sales demand. The reason for the importance in identifying this factor is that ultimately, most, if not all, budgets will be affected by the limiting factor. Therefore, if it can be identified at the outset, all managers can be informed of the restriction. McLane and Atrill 1999 state that "it is the limiting factor which...
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