Statistic-Based Method for Budgetary Control Limits Setting—Renewed Approach in the Context of Industry 4.0

Abstract

The chapter presents the issue of budget variance analysis (BVA), as one of the most important processes in Management Control (MC). Based on the current state of knowledge, shortcomings in methods for setting the budgetary control limits (BCL) were indicated. In short, BCL enables focusing on a significant budget variances. In business practice, BCL setting is mostly based on intuition and individual judgment of managers rather than on numerical calculation using IT systems. In the era of Industry 4.0 this kind of solutions are far from being enough to make right decisions in the right way. Therefore, the main research objective of the presented work was to develop effective and applicable method for BLC setting, which works in an objective manner. We decided to renew the idea of Shewhart’s control charts implementation in the BCL setting. Design science research (DSR) method was used to reach the research objective, starting with problem definition, through developing a new method for BCL setting, ending with its test and evaluation.