Delta company is adopting a Zero budgeting system. However, due to recent dynamic conditions such as inflation and environmental consideration. As head of the company accounting department, you advised the management to change the budgetary practice from zero budgeting to Rolling budgeting as the up-to-date budget will be always available which can lead to better motivation as the budgets are realistic. Required: What are the difficulties that Delta company will face when they change their budgetary practice?

Delta company is adopting a Zero budgeting system. However, due to recent dynamic conditions such as inflation and environmental consideration. As head of the company accounting department, you advised the management to change the budgetary practice from zero budgeting to Rolling budgeting as the up-to-date budget will be always available which can lead to better motivation as the budgets are realistic. Required: What are the difficulties that Delta company will face when they change their budgetary practice?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter7: Budgeting

Section: Chapter Questions

Problem 6MC: Which of the following is true in a bottom-up budgeting approach? Every expense needs to be...

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Suppose that the vice president of sales is a particularly pessimistic individual. If you were in charge of developing the master budget, how, if at all, would you be influenced by this knowledge?
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.
Which of the following statements is incorrect concerning budget preparation? A. The rolling budget approach is not often used in practice because it requires that management be in perpetual budgeting mode. B. If a zero-based budgeting approach is used, the annual budgeting process begins with a review of the results of the prior operating period. C. If a participative approach is used to prepare budgets, all levels of management are involved in the budgeting process. D. The preparation of the sales budget is the starting point in the budgeting process for all companies. E. Participative budgeting increases the risk that employees will create budgetary slack.
The budget process and budgets themselves can impact management actions, both positively and negatively. For instance, a common practice among not-for-profit organizations and government agencies is for management to spend any amounts remaining in a budget at the end of the budget period, a practice often called “use it or lose it.” The view is that if a department manager does not spend the budgeted amount, top management will reduce next year’s budget by the amount not spent. To avoid losing budget dollars, department managers often spend all budgeted amounts regardless of the value added to products or services. All of us pay for the costs associated with this budget system. Required Write a half-page report to a local not-for-profit organization or government agency offering a solution to the “use it or lose it” budgeting problem.
Both the budget process and budgets themselves can impact management actions, both positively and negatively. For instance, a common practice among not-for-profit organizations and government agencies is for management to spend any amounts remaining in a budget at the end of the budget period, a practice often called "use it or lose it." The view is that if a department manager does not spend the budgeted amount, top management will reduce next year's budget by the amount not spent. To avoid losing budget dollars, department managers often spend all budgeted amounts regardless of the value added to products or services. All of us pay for the costs associated with this budget system. Required Please respond by offering a solution to a not-for-profit that utilizes the "use it or lose it" budgeting problem.
Management may alter its actions during the year to bring actual results into line with the operating budget. An operating budget tends to become less accurate for periods further in the future. To offset this issue, some organizations routinely update their budget based on the latest available information. What would be things that a company would adjust to get the operating budget aligned?
Which of the following statements about top down budgeting is true? Multiple Choice It is an appropriate method to use in times of financial stress. Eliminates a manager's excuse who tries to claim that his budget is unrealistic The budget process is often more efficient. It allows senior management to better prioritize resources to propelling the growth of the company
Is it important for a company to follow a strict budget even though they may be experiencing phenomenal profits? Do you think that there will be a bias towards greed when creating the budget for this company? Explain. How does management greed influence budget decisions? Please consider each of the questions separately in this post. It is important for you to understand the value of the budget as a blueprint for the business – even in times of exceptional “good news”. It is also important to consider the role of greed within the budgeting process of the firm. Perhaps you might want to think about the budget as a communication to employees about what ownership and management believes is its focus. You might even want to see if any other of the exceptional “bad boys” in the business world were reflecting their greed even within their budgeting documents.
Which of the following statements is True? a. Budget data are generally prepared by top management and distributed downward in anorganization b. The budget committee is responsible for preparing detailed budget figures in anorganization c. The primary purpose of the cash budget is to show the expected cash balance at the endof the budget period. d. Under zero-based budgeting, a manager is required to start at zero budget levels each period, as if the programs involved were being initiated for the first time
Upon receipt of the budget, the team manager, June Jackson, has now informed you that, in keeping with industry players, the management of Pelican Merchandising have indicated an industry requirement to maintain a minimum cash balance of $185,000 each month. She has also noted that management is very keen on keeping the gearing ratio of the business as low as possible and would therefore prefer to cushion any gaps internally using equity financing.Based on the budget prepared, will the business be achieving this desired target? Suggest three (3) internal strategies that may be employed by management to improve the organization’s monthly cash flow and militate against or reduce any possible shortfall reflected in the budget prepared. Each strategy must be fully explained.
Which of the following statements is/are true? Select one: O a. One disadvantage of participative budgeting is employees' tendency to overestimate of revenues. O b. In a production budget, beginning inventory in units plus budgeted units to be produced equals unit sales minus targeted ending inventory in units. O C. All of the given statements are true O d. Production and inventory budgets form the basis for developing the sales budget. O e. When managers intentionally set budgeted costs too high and budgeted revenues too low, they are creating budgetary slack.
Lamberton Manufacturing Company has just completed its masterbudget. The budget indicates that the company’s operating cycleneeds to be shortened. Thus, the company will likely attempt:a. Stocking larger inventories.b. Reducing cash discounts for prompt payment.c. Tightening credit policies.d. None of the above selections is correct.