An investigation into the gap between budgets and experience: the case of Bamburi special products limited

Abstract

This study sought to compare the budgets and the export results in a period of four years from 1998 to 2001. An analysis of variances between capital expenditure budgets and the four year performance budgets on one hand and the export results on the other was done. The reasons for deviations and the remedial actions were sought. The analysis of variances depicts a huge variation from the set targets. The performance in the four-year shows that only a small proportion of the expected profits was attained. The highest level of achievement accounts for only 7% of the budget. The capital expenditure was equally below. The budgeted. Empirical evidence suggests that most budget targets are set to be 80% to 90% achievable (Merchant and Manzoni, 1989). This is in contrast to management accounting literature which suggests that for optimum motivation budget targets should be achievable 50 percent of the time. According to Marks (1966), there is. problem of planning ahead for expenditures to be incurred in two years time. The variances observed in this study add to the already complex challenge of dealing with the future which is uncertain