MANAGERIAL ACCOUNTING FOR MANAGERS
5th Edition
ISBN: 9781264196456
Author: Noreen
Publisher: MCG
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Chapter P, Problem P.1E
Planning and Control
Many companies use budgets for three purposes. First, they use them to plan how to deploy resources to best serve customers. Second, they use them to establish challenging goals, or stretch targets, to motivate employees to strive for exceptional results. Third, they use them to evaluate and reward employees.
Assume that you are a sales manager working with your boss to create a sales budget for next year. Once the sales budget is established, it will influence how other departments within the company plan to deploy their resources. For example, the manufacturing manager will plan to produce enough units to meet budgeted unit sales. The sales budget will also be instrumental in determining your pay raise, potential for promotion, and bonus. If actual sales exceed the sales budget, it bodes well for your career. If actual sales are less than budgeted sales, it will diminish your financial compensation and potential for promotion.
Required:
- Do you think it would be appropriate for your boss to establish the sales budget without any input from you? Why?
- Do you think the company would be comfortable with allowing you to establish the sales budget without any input from your boss? Why?
- Assume the company uses its sales budget for only one purpose—planning to deploy resources in a manner that best serves customers. What thoughts would influence your estimate of future sales as well as your boss’s estimate of future sales?
- Assume the company uses its sales budget for only one purpose—motivating employees to strive for exceptional results. What thoughts would influence your estimate of future sales as well as your boss’s estimate of future sales?
- Assume the company uses its sales budget for only one purpose—to determine your pay raise, potential for promotion, and bonus. What thoughts would influence your estimate of future sales as well as your boss’s estimate of future sales?
- Assume the sales budget is used for all three purposes described in questions 3—5. Describe any conflicts or complications that might arise when using the sales budget for these three purposes.
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Planning and Control
Many companies use budgets for three purposes. First, they use them to plan how to deploy resources to best serve customers. Second, they use them to establish challenging goals, or stretch targets, to motivate employees to strive for exceptional results. Third, they use them to evaluate and reward employees.
Assume that you are a sales manager working with your boss to create a sales budget for next year. Once the sales budget is established, it will influence how other departments within the company plan to deploy their resources. For example, the manufacturing manager will plan to produce enough units to meet budgeted unit sales. The sales budget will also be instrumental in determining your pay raise, potential for promotion, and bonus. If actual sales exceed the sales budget, it bodes well for your career. If actual sales are less than budgeted sales, it will diminish your financial compensation and potential for promotion.
Required:
1. Do you think it would…
A company can expect to receive which of the following benefits when it starts its budgeting process?
The budget provides managers with a benchmark against which to compare actual results for performance evaluation.
The planning required to develop the budget helps managers foresee and avoid potential problems before they occur.
The budget helps motivate employees to achieve sales growth and cost-reduction goals.
All of the above
A company can expect to receive which of the following benefits when it starts its budgeting process?
a. The budget provides managers with a benchmark against which to compare actual results for performance evaluation.
b. The planning required to develop the budget helps managers foresee and avoid potential problems before they occur.
c. The budget helps motivate employees to achieve sales growth and cost-reduction goals.
d. All of the above
Chapter P Solutions
MANAGERIAL ACCOUNTING FOR MANAGERS
Ch. P - Prob. P.1QCh. P - Pick any major television network and describe...Ch. P - If you had to decide whether to continue making a...Ch. P - Why do companies prepare budgets?Ch. P - Prob. P.5QCh. P - Why is managerial accounting relevant to...Ch. P - Prob. P.7QCh. P - Why do management accountants need to understand...Ch. P - Prob. P.9QCh. P - Pick three industries and describe how the risks...
Ch. P - Pick any large company and explain three ways that...Ch. P - Why do companies that implement Lean Production...Ch. P - Why are leadership skills important to managers?Ch. P - Why are leadership skills important to managers?Ch. P - Prob. P.16QCh. P - Prob. P.17QCh. P - Prob. P.18QCh. P - Why do companies take a physical count of their...Ch. P - Why do companies use sequential prenumbering for...Ch. P - Planning and Control Many companies use budgets...Ch. P - Prob. P.2ECh. P - Prob. P.3ECh. P - Ethics and the Manager Richmond, Inc., operates a...Ch. P - Prob. P.6ECh. P - Ethics In Business Consumers and attorney generals...Ch. P - Prob. P.8ECh. P - Prob. P.9ECh. P - Corporate Social Responsibility In his book...Ch. P - Prob. P.11ECh. P - Cognitive Bias and Decision Making During World...Ch. P - Ethics and Decision Making Assume that you just...
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- Sara Bellows, manager of the telecommunication sales team, has the following department budget: Her responsibility center is best described as a(n): a.cost center. b.revenue center. c.profit center. d.investment center.arrow_forwardSuppose that the controller of your companys largest factory is a particularly optimistic individual. If you were in charge of developing the master budget, how, if at all, would you be influenced by this knowledge?arrow_forwardEfficient and effective use of limited resources is the key to success in today’s economy. Assisting in the budget planning process is a major task for managerial accountants. Discuss the pros and cons of the two basic philosophies that organizations should follow to plan and develop their budgets.arrow_forward
- Which of the following is a benefit of using budget-management software? (check all that apply). Allows companies to determine the exact amount of sales that will be achieved in the upcoming fiscal period. Allows companis with multiple business segments to comine financial data from each of its segments to prepare company-wide budgeted financial Allows managers to access the budget from several locations through the internet. Allows managers to perform sensitivity analysis on each individual business segment.arrow_forwardBudgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following situations will likely lead to human behavior problems? a. allowing employees the opportunity to be a part of the budget process b. setting goals too loosely, creating a budgetary slack c. setting goals that are consistent across the firm d. setting goals that are reasonable and attainablearrow_forwardMaster budgets can provide a great deal of information to managers and investors including: O Sales forecasts that allow costing, production information, staffing. and cash flow information. O How much investors will get in dividends for the year. O A clear guideline for production so they know when to quit making product.arrow_forward
- Assignment Details The chief financial officer (CFO) discussed your analysis and strategy with the executive team and feels that you are the perfect person to work on the corporate budget. Based on the current external environment, the organization has limited resources, and each department has been asked to reduce costs. Based on your experience, answer the following questions: What type of costs should the departments reduce first and why? How can the organization prevent budgetary slack in the budgeting process since the bonuses of managers are tied to the budget? What are some potential ethical issues all organizations deal with in the budgeting process? What are some ways of dealing with these potential problems?arrow_forwardWhich of the following is true in a bottom-up budgeting approach? Group of answer choices departments determine their needs and relate them to the overall goals supervisors tell departments their budget amount and the departments are free to work within those amounts departments budget their needs however they see it every expense needs to be justifiedarrow_forwardDescribe how and why managers of companies use budgets. In doing so, cite three advantages of using budgets to manage businesses. Additionally, cite three mistakes that are often made by companies in setting their budgetary goals or standards. Provide an example of how each of these three mistakes can negatively impact the business.arrow_forward
- Why is it important that a firm prepares a budget and how they analyze the ongoing performance? What advantages does a business have by going through the budget process?arrow_forward: The chief executive of your company has asked you to recommend an approach to be used in preparing budgets and to draft guidelines for senior managers on managing performance using budgets. As the management accountant prepare a report to the chief executive describing your selected approach and your recommended guidelines For senior managers. In preparing your report you should consider the behavioral consequences of using budgets in planning and controlarrow_forwardWhat are some characteristics of performance-based budgeting? What are some advantages and disadvantages of performance-based budgeting? How does the organization you selected incorporate performance-based budgeting? If the organization you selected does not incorporate performance-based budgeting, how does the organization reflect or incorporate program outcomes to the budget? When responding to classmates, compare the organization you chose to theirs. Is one organization more successful at describing their strategic plan and aligning their budget to reflect outcomes? Why or why not?arrow_forward
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