Budgeting by the Objective and Task Method

In the objective and task method, the manager starts with the sales objectives, which are specified in the sales forecast. Then the manager determines the task that must be accomplished in order to achieve the objectives and estimates the costs of performing those tasks. These costs will be reviewed in light of the company’s overall profit objective. If the costs are too high, the manager may be asked to find a different way of achieving the objective or some adjustment may be made to the original objective. This iterative process continues until management is satisfied with both the objectives and the means of achieving them. Many firms use some variation of the objective and task method.

The American Marketing Association, a nonprofit association of marketing professionals and academics, uses an objective and task .method to develop its budget. Its budgeting process starts with forecasts of membership revenue and publication sales. Then the senior managers estimate the costs, of the programs designed to achieve the forecasted revenues. If the projected expenses exceed revenues, adjustments in costs, programs, and revenues are made until the budget is balanced.