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Master+Budgets+_8 - Chapter 7 The Budget Process Learning...

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Chapter 7 The Budget Process
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1. What is the importance of the budgeting process? 2. How do the advantages and disadvantages of imposed budgets and participatory budgets compare? C7 Learning Objectives
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3. Why does a budget manual facilitate the budgeting process? 4. What complicates the budgeting process in a multinational environment? 5. What is the starting point of a master budget and why is this item chosen? C7 Continuing . . . Learning Objectives
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6. How are the various master budget schedules prepared and how do they relate to one another? 7. Why is the cash budget so important in the master budgeting process? C7 Continuing . . . Learning Objectives
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8. How does the statement of cash flows relate to the income statement and the cash budget? 9. Why does actual revenue from a product differ from budgeted revenue? (Appendix) C7 Continuing . . . Learning Objectives
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10. How does traditional budgeting differ from zero-based budgeting? (Appendix) C7 Continuing . . . Learning Objectives
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Different Roles of Budgeting Process and Budgets Planning Motivation Evaluation Coordination Communication Education Ritual
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Participation in the Budgeting Process Imposed budgets Participatory budgets Middle Management Operational Management Top Management
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Best Times to Use Imposed Budgets In start-up organizations In extremely small businesses In times of economic crisis When operating managers lack budgetary skills or perspective When organizational units require precise coordination of efforts
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Advantages of Imposed Budgets Increase probability that organization’s strategic plans will be incorporated in planned activities Enhance coordination among divisional plans and objectives Use top management’s knowledge of overall resource availability Reduce the possibility of input from inexperienced or uninformed lower-level employees Reduce the time frame for the budgeting process
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Disadvantages of Imposed Budgets May result in dissatisfaction, defensiveness, and low morale among individuals who must work under the budget Reduce the feeling of teamwork May limit the acceptance of the stated goals and objectives Limit the communication process among employees and management May create a view of the budget as a punitive device May result in unachievable budgets for international divisions if local operating and political environments are not adequately considered May stifle the initiative of lower-level managers
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