Chapter List

Chapter Aims and Outcomes

To explain the concepts and ideas of maintenance budgeting and the linkages between the maintenance budget and the company budget.

On completion of this chapter you should be able to:

• understand that the company budget is a financial statement of its long- and short-term plans and that budgetary control is an integral part of the company s management control process;

• appreciate that the maintenance budget is an essential element of the company budget and that there is a need for a long-term maintenance budget (covering major work) and a maintenance expenditure budget;

• understand an outline procedure for building the maintenance budget and how the procedure needs modification to suit different administrative structures.

Chapter Route Map

Key Words

• Budgeting

• Zero-based budgeting

• Standard costs

• Profit center

• Variance

• Capital budget

• Company revenue budget

• Cost center

3.1 Introduction

A systems model of an industrial company was shown in Figure 2.2. It incorporates the management control element, the function of which is to monitor the system outputs, compare these with what was expected, identify any deviation and then redirect the company s effort as necessary. At company level budgetary control is one of the key management control mechanisms.

The preparation of a company budget can be regarded as an integral part of the...