{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 6 study guide

Chapter 6 study guide - Chapter 6 Study Guide Planning the...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 6 Study Guide Planning, the balanced scorecard, and budgeting Budget: a plan for the future set in quantitative terms. Budgeting: the process of expressing a company’s goals and objectives from its bal- anced scorecard perspectives. Planning for future activities, as long as the benefits derived from the budget ex- ceed the cost. Planning: the primary purpose of a budget is to describe the financial ramifications of the future. Must determine the amount of customers wanting to buy a product and then determine the amount of resources needed to provide those customers with service. Customers must be considered or they can be lost. Communication and coordination: Functions and divisions must work together to operate effectively and efficiently (in- ternal perspective) interactions and plans must be understood by any organization as a whole. Resource allocation: Budgeting ensures that information is available to help determine where resources should go in a company. Important to understand value-added and nonvalue-added activities (should be re- duced). Evaluation and control: Budgets serve a useful benchmark for evaluation of performance. Comparing actual performance results to the budget. Budget may need revision, process may need ad- justment, or both. Companies learn from both their mistakes and their successes. 3 important aspects of the costs of budgeting: Time and resource requirements Cost is large in terms of human capital, as it takes many people and much time to create a budget. (budget director, department managers, budget commit- tees) Adaptability of departments and segments of the business Rigid adherence to a budget can limit the ability of functions or segments to take advantage of profitable opportunities. Opposite if company sticks to an unprofitable allocation of resources. Motivation and behavior of individuals. Individuals who develop budgets are affected by it, therefor a function must communicate with others to prevent inadequate functional budgets. Budgetary slack: the difference between what a person with input in the budgeting process chooses as an estimate of revenues or expenses and what
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
is actually a realistic estimate. It is a deliberately introduced bias by those who fear the consequences of not meeting the budget. Mandated versus Participatory budgeting: Mandated budgeting: relies on predetermined standards set by upper-level man- agers. “Top-down” budgeting. Passed down to lower levels without input from them, Are in line with the goals and objectives of the upper level management.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern