Exercise 7-1A Budget responsibility
Teresa Flanagan, the accountant, is a perfectionist. No one can do the job as well as she can. Indeed, she has found budget information provided by the various departments to be worthless. She must change everything they give her. She has to admit that her estimates have not always been accurate, but she shudders to think of what would happen if she used the information supplied by the marketing and operating departments. No one seems to care about accuracy. Indeed, some of the marketing staff have even become insulting. When Ms. Flanagan confronted one of the salespeople with the fact that he was behind in meeting his budgeted sales
Required
Write a short report suggesting how the budgeting process could be improved.
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Survey Of Accounting
- Ethics and professional conduct in business The director of marketing for Truss Industries Inc.. Ellen Knutson, had the following discussion with the company controller. Bud Wyckoff. on February 26 of the current year: Ellen: Bud, it looks like I'm going to spend much less than indicated on my February budget. Butt: I'm glad to hear it. Ellen: Well. I'm not so sure it's good news. I'm concerned that the president will see that I'm under budget and reduce my budget in the future. The only reason that I look good is that we've delayed an advertising campaign. Once the campaign hits in May. I'm sure my actual expenditures will go up. You see. we are also having our sales convention in May. Having the advertising campaign and the convention at the same time is going to kill my May numbers.arrow_forwardStatic budget for a service company A bank manager of City Savings Bank Inc. uses the managerial accounting system to track the costs of operating the various departments within the bank. The departments include Cash Management, Trust, Commercial Loans, Mortgage Loans, Operations, Credit Card, and Branch Services. The static budget and actual results for the Operations Department are as follows: Resources Budget Actual Salaries 200,000 200,000 Benefits 30.000 30,000 Supplies 45,000 42,000 Travel 20,000 30,000 Training 25,000 35,000 Overtime 25,000 20,000 Total 345,000 357,000 Excess of actual over budget 12,000 a. What information is provided by the budget? Specifically, what questions can the bank manager ask of the Operations Department manager? b. What information does the static budget fail to provide? Specifically, could the budget information be presented differently to provide even more insight for the bank manager?arrow_forwardVariable costs and activity bases in decision making Sales volume has been dropping at Mumford Industries. During this time, however, the Shipping Department manager has been under severe financial constraints. The manager knows that most of the Shipping Department's effort is related to pulling Inventory from the warehouse for each order and performing the paperwork. The paperwork involves preparing shipping documents for each order. Thus, the pulling and paperwork effort associated with each sales order is essentially the same, regardless of the size of the order. The Shipping Department manager has discussed the financial situation with senior management. Senior management has responded by pointing out that because sales volume has been dropping, the amount of work in the Shipping Department also should be dropping. Thus, senior management told the Shipping Department manager that costs should be decreasing in the department. The Shipping Department manager prepared the following information: Given tills information, how would you respond to senior management?arrow_forward
- ____ 46. The budget process involves doing all the following except: a. establishing specific goals b. executing plans to achieve the goals c. periodically comparing actual results with the goals d. dismissing all managers who fail to achieve operational goals specified in the budget ____ 47. Division W of MJW Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $100,000. What is the profit margin for Division W? a. 14% b. 2.8% c. 10% d. 5.47% ____ 48. Bulls Company is considering the acquisition of a machine that costs $375,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine? a. 3 years b. 4.3 years c. 2.5 years d. 5 years ____ 49. The…arrow_forwardPLEASE ANSWER ALL TRUE OR FALSE 12. If actual results are different from planned results by a large amount, the difference should be investigated by management to achieve effective budgetary control.13. Cash budget reports are often prepared daily, whereas others are prepared less frequently depending on the activities being monitored.arrow_forwardCase 3 Ch 22 discussed Budgeting which involves (1) Planning - establishing specific goals, (2) Directing - executing plans to achieve the goals, and (3) Controlling - periodically comparing actual results with the goals and use the feedback to adjust activities in the future. Ch 23 discussed Budget Variances- is the difference between the budgeted and the actual amount. The budget variance is favorable when the actual revenue is higher than the budget or when the actual expense is less than the budget. Complete the Personal Budget which assumes: Monthly Gross Wages=60000/12 $ 5,000.00 Deduct: Fed Income Tax-15% $ 750.00 per tax rate schedule https://turbotax.intuit.com/tax-tips/irs-tax-return/current-federal-tax-rate-schedules/L7Bjs1EAD FICA - 7.5% $ 375.00 State Inc Taxes 5% $ 250.00 https://www.ftb.ca.gov/forms/2020/2020-California-Tax-Rate-Schedules.pdf Net Pay for Budget $ 3,625.00 CH 28…arrow_forward
- Variable costs and activity bases in decision making Sales volume has been dropping at Pinnacle Publishing Company. During this time, however, the Shipping Department manager has been under severe financial constraints. The manager knows that most of the Shipping Department's effort is related to pulling inventory from the warehouse for each order and performing the paperwork. The paperwork involves preparing shipping documents for each order. Thus, the pulling and paperwork effort associated with each sales order is essentially the same, regardless of the size of the order. The Shipping Department manager has discussed the financial situation with senior management. Senior management has responded by pointing out that sales volume has been dropping, so that the amount of work in the Shipping Department should be dropping. Thus, senior management told the Shipping Department manager that costs should be decreasing in the department. The Shipping Department manager prepared the following information: Given this information, how would you respond to senior management?arrow_forwardIntegrity and evaluating budgeting systems The city of Milton has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each department. The annual budget is divided by 12 months to provide a constant monthly static budget. On June 30, all unspent budgeted monies for the budget year from the various city departments must be "returned" to the General Fund. Thus, if department heads fail to use their budget by year-end, they will lose it. A budget analyst prepared a chart of the difference between the monthly actual and budgeted amounts for the recent fiscal year. The chart was as follows: a. Interpret the chart. b. Suggest an improvement in the budget system.arrow_forwardStatic budget for a service company A bank manager of City Savings bank Inc. uses the managerial accounting system to track the costs of operating the various departments within the bank. The departments include Cash Management, Trust, Commercial Loans, Mortgage Loans, Operations, Credit Card, and Branch Services. The static budget and actual results for the Operations Department are as follows: Resources Budget Actual Salaries 200,000 200,000 Benefits 30,000 30,000 Supplies 45,000 42,000 Travel 20,000 30,000 Training 25,000 35,000 Overtime 25,000 20,000 Total 345.000 357,000 Excess of actual over budget 12,000 a. What information is provided by the budget? Specifically, what questions can the bank manager ask of the Operations Department manager? b. What information does the static budget fail to provide? Specifically, could the budget information be presented differently to provide even more insight for the bank manager?arrow_forward
- Static budget for a service company A bank manager of City Savings Bank Inc. uses the managerial accounting system to track the costs of operating the various departments within the bank. The departments include Cash Management, Trust, Commercial Loans, Mortgage Loans, Operations, Credit Card, and Branch Services. The static budget and actual results for the Operations Department are as follows: Resources Budget Actual Salaries 200,000 200,000 Benefits 30.000 30,000 Supplies 45,000 42,000 Travel 20,000 30,000 Training 25,000 35,000 Overtime 25,000 20,000 Total 345,000 357,000 Excess of actual over budget 12,000 a. What information is provided by the budget? Specifically, what questions can the bank manager ask of the Operations Department manager? b. What information does the static budget fail to provide? Specifically, could the budget information be presented differently to provide even more insight for the bank manager?arrow_forwardVariable costs and activity bases in decision making Sales volume has been dropping at Mumford Industries. During this time, however, the Shipping Department manager has been under severe financial constraints. The manager knows that most of the Shipping Department's effort is related to pulling Inventory from the warehouse for each order and performing the paperwork. The paperwork involves preparing shipping documents for each order. Thus, the pulling and paperwork effort associated with each sales order is essentially the same, regardless of the size of the order. The Shipping Department manager has discussed the financial situation with senior management. Senior management has responded by pointing out that because sales volume has been dropping, the amount of work in the Shipping Department also should be dropping. Thus, senior management told the Shipping Department manager that costs should be decreasing in the department. The Shipping Department manager prepared the following information: Given tills information, how would you respond to senior management?arrow_forward
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