Answered: Budget slack in the operating budgets…

Budget slack in the operating budgets a. will cause an organization to operate more efficiently b. is rarely found if the budgets are imposed c. results from

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 1CMA: When compared to static budgets, flexible budgets: a. offer managers a more realistic comparison of...

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Which of the following is true in a bottom-up budgeting approach? Every expense needs to be justified. Supervisors tell departments their budget amount and the departments are free to work within those amounts. Departments budget their needs however they see fit. Departments determine their needs and relate them to the overall goals.
Define static budget. Give an example that shows how reliance on a static budget could mislead management.
Which of the following is not a part of budgeting? A. planning B. finding bottlenecks C. providing performance evaluations D. preventing net operating losses
Flexible budgeting, performance measurement, and ethics Montevideo Manufacturing, Inc. produces a single type of small motor. The bookkeeper who does not have an in-depth understanding of accounting principles prepared the following performance report with the help of the production manager. In a conversation with the sales manager, the production manager was overheard saying, You sales guys really messed up our May performance, and it is only because production did such a great job controlling costs that we arent in even worse shape. Required: 1. Do you agree with the production manager that the manufacturing area did a good job of controlling costs? 2. Prepare a flexible budget for Montevideo Manufacturings expenses at the following activity levels: 45,000 units, 50,000 units, and 55,000 units. 3. Prepare a revised performance report, using the most appropriate flexible budget from (2) above. 4. Now what is your response to the production managers claim? 5. Assume that you have just been hired as the new accountant. You observe that the production manager is about to receive a large bonus based on the favorable materials, labor, and factory overhead variances indicated in the flexible budget prepared by the bookkeeper. Using the IMA Statement of Ethical Professional Practice as your guide, what standards, if any, apply to your responsibilities in this matter?
Slack in operating budgets makes an organization more efficient and effective. requires managers to work harder to achieve the budget. results from unintentional managerial acts. is greater when managers are allowed to participate in the budgeting process.
Information technology has made it easier for managers to perform all of the following tasks except a. preparing performance reports that identify variances between actual and budgeted revenues and costs. b. combining individual units’ budgets into the companywide budget. c. sensitivity analyses. d. removing budgetary slack from the budget.
Information technology has made it easier for managers to perform all of the following tasks except preparing performance reports that identify variances between actual and budgeted revenues and costs. combining individual units’ budgets into the companywide budget. sensitivity analyses. removing budgetary slack from the budget.
The first step of the budget process is: plan direct control feedback Static budget are often used by: production department. administrative departments. responsible centers. capital projects. A budget serves as a benchmark against which Actual results can be compared. Allocated results can be compared. Actual results become inconsequential. Allocated results become inconsequential. The following are characteristics of an effective budget, EXCEPT: Goals should be attainable. Evaluations should be made carefully with opportunities to explain any failures. They should be properly applied to avoid negative effects. Customers affected by a budget should be consulted when it is prepared. Which of the following is NOT a benefit of budgeting? It forces managers to look to the future. It plays an important role in communication within the organization. It serves an important role in motivating and rewarding employees. It encourages executives to build up organizational slack.…
Budgets 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 attainable
Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control. True or False In a flexible budget, when the activity declines, the total variable cost also declines. True or False The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity. True or False To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity. True or False Fixed costs should usually be included in performance reports because fixed costs are generally controllable. True or False
Which of the following statements are TRUE? I. Responsibility accounting attempts to assign blame for problems to a specific manager.II. One benefit of a budget is that it helps managers gather relevant information for improving future performance.III. Challenging budgets tend to motivate improved performance.IV. Controllability may be difficult to pinpoint because some costs are the result of the market, not the manager.
Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem? Allowing employees the opportunity to be a part of the budget process Allowing goals to be so low that employees develop a "spend it or lose it" attitude Setting goals too tightly making it difficult to meet performance expectation Setting goals among managers that conflict with one another