Budgeting Basics and Beyond

8.17. Capital Expenditures

Variance reports are useful in controlling capital expenditures by looking at the actual versus budgeted costs as well as actual versus budgeted times for proposals at each stage of activity. Such reports enable managers to take corrective cost-saving action, such as changing the construction schedule. The director of the project is held accountable for the construction cost and time budget. Component elements within the project also should be analyzed. We also can compare the expected payback period and actual payback period. This assists in measuring operational results and budgeting efficiency. Also, estimated cash flows of the project can be compared with actual cash flows.