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Budget motivation C1
For each of the following items 1 through 5, indicate yes if the item is an important budgeting guideline or no if it is not.
_____1. Employees should have the opportunity to explain differences from budgeted amounts.
_____2 .Budgets should include budgetary slack.
_____3. Employees impacted by a budget should be consulted when it is prepared.
_____4. Goals in a budget should be set low so targets can be reached.
_____5. Budgetary goals should be attainable.
Budget:
It is an estimated financial plan for future time period. It is used by management as an internal tool. It is prepared for a defined period of time.
To identify: Whether an item is important budgeting guideline or not.
Explanation of Solution
1.
Yes, employees should have the opportunity to explain differences from budgeted amounts.
Employees should be given opportunity to explain differences from budgeted amounts as this will motivate the employees. Top management will come to know the discrepancy in their budget. If the discrepancy is genuine then top level management should change the budget.
Hence, it is an important budgeting guideline.
2.
Yes, budget should include budgetary slack.
Budgetary slack is underestimation of revenue or income, or overestimation of expenses in budget. It is done to make it easier for employees to achieve. It makes budget more flexible.
Hence, it is an important budgeting guideline.
3.
Yes, employees impacted by a budget should be consulted when it is prepared.
Employees impacted by the budget should be consulted when it is prepared, as they need to follow that budget. They know the real implications, results of following that budget. They use that budget so they know better than top level management about that budget.
Hence, it is an important budgeting guideline.
4.
No, goals in budget should not be set low to achieve targets.
Setting goals low will de-motivate the employees. They will become lazy and discouraged. So goals should not be set low. They should be such that motivates the employee to work harder and harder..
Hence, it is not an important budgeting guideline.
5.
Yes, budgetary goals should be attainable.
Budgetary goals should be attainable. They should be such that employees should be able to achieve them. They should not be too high as that will discourage the employees and employees will give up. They should not be beyond the capabilities of employees.
Hence, it is an important budgeting guideline.
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Chapter 20 Solutions
FINANCIAL&MANAGERIAL ACCT.-CONNECT ONLY
- Matching Following are a number of key terms and concepts introduced in the chapter, along with a list of corresponding definitions. Match the appropriate letter for the key term or concept to each definition provided (items 1–12). Note that not all key terms and concepts will be used. Answers are provided at the end of this chapter.a. Budgetingb. Top-down budgetingc. Participative budgetingd. Zero-based budgetinge. Single-period budgetf. Rolling (or continuous) budgetg. Operating budgeth. Budget slack (or budget padding)i. Cash budgetj. Committed costk. Discretionary costl. Standard costm. Ideal (or engineered) standardn. Attainable standardo. Past experience standardp. Predetermined overhead application rate____ 1. A budgeting process that involves justifying resource requirements based on an analysis and prioritization of unit objectives without reference to prior period budget allowances.____ 2. A budgeting approach that implies little or no input from lower levels of…arrow_forwardMultiple Choice For each of the following questions, circle the best response.Answers are provided at the end of this chapter.1. The cash budget is prepareda. concurrently with the sales forecast.b. based upon the purchases/production budget.c. after the budgeted income statement.d. from the budgeted balance sheet.e. independently from the other budgets.arrow_forwardindicate yes if the item is an important budgeting guideline orno if it is not. Employees impacted by a budget should be consulted when it is prepared.arrow_forward
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- Q3:-what is the difference between budgets and budgeting, Reinforce your answer with examples , dates, and equations:-arrow_forward39. When doing the budget, what is projected first? a) Census b) Expenses c) Reimbursement d) Labor hoursarrow_forwardQ.Operating and financial budgets. Which of the following statements is correct regarding the drivers of operating and financial budgets? a. The sales budget will drive the cost of goods sold budget. b. The cost of goods sold budget will drive the units of production budget. c. The production budget will drive the selling and administrative expense budget. d. The cash budget will drive the production and selling and administrative expense budgets.arrow_forward
