Chapter 1, Problem 1QC

To determine

To identify: The correct option out of the given statements.

Answer to Problem 1QC

Option a. Planning is the management responsibility which involves the use of budgets.

Explanation of Solution

Management responsibilities: The management of the organization is responsible for various functions like planning, directing, controlling, and decision making in order to achieve the success. A manager implements the established standards, thinks of various alternatives in order to meet the defined standards or budgets and identify the factors leading towards undesirable results.

a.

Planning: Planning is the first and foremost function performed by the manager which is concerned with defining objectives and goals of the particular entity and the manner in which these goals can be achieved. While planning, the management sets particular standards in the form of budgets. Budgets are defined after a due observation of the financial structure of the organization. Planning deals with the formation of budgets. Thus, this option is correct.

b.

Directing: Directing is the activity which involves supervising the daily operations of the business entity and it involves taking small decisions which are concerned with sales or products such as the deciding the promotional plan for a particular product in order to boost its sales. But this activity does not involve the use of budgets. Thus, this option is not correct.

c.

Controlling: Controlling is the responsibility of management which deals with the revaluation of plans and actions by comparing the actual results obtained and the standards set against them. Controlling is a kind of feedback which determines to what level an entity has been successful in its operations. Thus controlling is the responsibility of the management which involves evaluating the result of operations against the budget but does not involve the use of budgets. Therefore, the option is correct.

d.

None of the above: The management activity which involves comparing the budgets and actual results is controlling. Thus, this option is incorrect.