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Unformatted text preview: Chapter 10 Using Budgets to Achieve Organizational Objectives QUESTIONS 10-1 A budget is a quantitative model of the expected consequences of the organizations short-term operating activities. A budget typically expresses the expected money inflows and outflows in order to assess whether the planned operations will meet the organizations financial objectives. 10-2 Flexible (or variable) resources are those that vary with the activity level of the firm or organization. Those that do not change with the activity level are capacity-related (or committed or fixed resources). 10-3 Yes, a spending plan is a budget since it provides a summary, in financial terms, of the students spending intentions. 10-4 In many ways the goal of a family budget is quite similar to the goal of a budget developed for an organization. In these settings, the goal is to help both families and organizations achieve their objectives by allocating their resources wisely. Organizational budgets usually differ from family budgets in sheer size (the dollar amounts proposed), scope (the number of operating units and their goals), and number of iterations (submission and resubmissions of budgets) before the final budget is determined. 10-5 A production plan is an exhibit that identifies proposed production during an interval of time, such as a week or a month. A production plan in a courier company identifies the number of drivers and trucks needed and assigns drivers and trucks to routes. 137 Atkinson, Solutions Manual t/a Management Accounting, 5E 10-6 Financial budgets represent projected financial results for an organization. Such budgets include a statement of expected cash flows, projected balance sheet, and a projected income statement. These are often called pro forma financial statements. Operating budgets are plans used to guide the operations of the organization. Such plans include sales, capital spending, production, materials purchasing, labor hiring and training, and administrative and discretionary spending plans. 10-7 You should not jump to the conclusion that the universitys hiring and training plan is likely to be more important because it hires skilled rather than unskilled labor. A number of factors determine the importance of a labor hiring and training plan in any organization. However, the two most important are likely the amount of employee turnover that requires replacement and the amount of ongoing retraining that the organization must provide. If the university has reached relatively stable employment, the labor hiring and training plan would be relatively unimportant since university faculty members are expected to attend to their own training. If the municipality is continuously hiring new employees or retraining existing employees to use equipment, it will have a continuous need for a hiring and training plan....
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- Spring '12