Chapter 9

Chapter 9 - employees from other areas within the company....

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John Rubinetti AC 12 3/10/08 Chapter 9, Questions 2,7,8 2. There are six benefits to budgeting; - First it requires all levels of management to plan ahead and formalize goals. - It provides definite objectives for evaluating performance at each level of responsibility. - It creates an early warning system for potential problems, so that management can make changes before things get out of hand. - It organizes the coordination of activities within the business by correlating the goals of each segment with overall company objectives. - It results in greater management awareness of the entity’s overall operations and the impact of external factors such as economic trends. - It motivates personnel throughout the organization to meet planned objectives. 7. Participative budgeting is a process that involves the use of a bottom-to-top approach. This requires input from lower level management during the budgeting process to involve
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Unformatted text preview: employees from other areas within the company. Potential benefits of this approach are that lower level managers provide better budgetary estimates by having more detailed knowledge of the specifics of their job. Also by involving lower level managers in the process, it is more likely that they will perceive the budget as being fair and reasonable. One disadvantage of participative budgeting is that it takes more time, thus costing more. Another disadvantage of participative budgeting is that it may allow managers to abuse the process through budgetary slack. 8. Budgetary slack is the amount by which a manager intentionally underestimates budgeted revenues or overestimates budgeted expenses in order to make it easier to achieve budgetary goals. Managers may have an incentive to create budgetary slack in order to increase the likelihood of receiving a bonus, or decrease the likelihood of losing their job....
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This note was uploaded on 04/29/2008 for the course AC 12 taught by Professor Caster during the Spring '08 term at Fairfield.

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