Ineffective budget control systems are characterized by
Answer (D) is correct.
Ineffective budget control systems are characterized by each of the items
noted. The use of budgets for planning only is a problem that must be
resolved through the education process. Management must be educated
to use the budget documents for control, not just planning. Management
must learn that budgets can motivate and help individuals achieve
professional growth as well as the goals of the firm. Ignoring budgets
obviously contributes to the ineffectiveness of the budget system.
Finally, feedback must be timely or lower management and employees
will soon recognize that budget feedback is so late it provides no
information, making the budget a worthless device.
Which of the following statements regarding budgets is false?
Answer (B) is correct.
Budget formulation is a planning function; however, budgets are also useful control
devices. Budgets provide a basis for control of performance through comparisons of actual
with budgeted data. They permit analysis of variations from plans and signal the need for
corrective managerial action.
A planning calendar in budgeting is the
Answer (B) is correct. The budget planning calendar is the schedule of activities for the development and adoption of the budget. It should include a list of dates indicating when specific information is to be provided by each information source to others. The preparation of a master budget usually takes several months. For instance, many firms start the budget for the next calendar year some time in September in hopes of having it completed budgets are based on forecasts prepared by others and the budgets of other departments, it is essential to have a planning calendar to ensure the proper integration of the entire process.
A budget manual, which enhances the operation of a budget system, is most likely to include
Answer (B) is correct. A budget manual describes how a budget is to be prepared. Items usually included in a budget manual are a planning calendar and distribution instructions for all budget schedules. Distribution instructions are important because, once a schedule is prepared, other departments within the organization will use the schedule to prepare their own budgets. Without distribution instructions, someone who needs a particular schedule may be overlooked.
Which one of the following is not an advantage of a participatory budgeting process?
Answer (D) is correct. Uncertainties can be prepared for, but they cannot be subjected to human control through any budget process.
In developing the budget for the next year, which one of the following approaches would produce the greatest amount of positive motivation and goal congruence?
Answer (D) is correct. Joint development of goals is more conducive to motivation, as is allowing divisional managers to develop the implementation plan. Goal congruence is enhanced when senior management is involved in the budgeting process along with division managers.
Which one of the following statements concerning approaches for the budget development process iscorrect?
Answer (D) is correct. Since department managers have the most detailed knowledge about organizational operations, they should use this information as the building blocks of the operating budget.
Rock Industries has four divisions. In the quest to develop a more achievable budget for the
coming year, the chief executive officer has elected to develop the company’s budget by
using a decentralized bottom-up budget approach. Chip Jarrett is production manager in
one of the divisions. Jarrett’s involvement in the budget process this year will probably
Answer (C) is correct.
Management of the division is responsible for setting the sales forecast.
As production manager, Jarrett has the responsibility of ensuring the
products are ready on schedule and in the right quantities.
When developing a budget, an external factor to consider in the planning process is
Answer (D) is correct.
Several planning assumptions should be made at the beginning of the
budget process. Some of these assumptions are internal factors; others
are external to the company. External factors include general economic
conditions and their expected trend, governmental regulatory measures,
the labor market in the locale of the company’s facilities, and activities of
competitors, including the effects of mergers.
An advantage of participative budgeting is that it