h However participative budgeting has three potential problems i Setting

H however participative budgeting has three potential

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(h) However, participative budgeting has three potential problems: (i) Setting standards that are either too high or low – managers tend to set too loose or too tight budgets. (ii) Budgetary slack may be built into the budgets – budgetary slack exists when managers deliberately underestimate revenues and overestimate costs in an effort to avoid adverse responsibility. (iii) Pseudo-participation – this is where top management assumes total control on the budgeting process, seeking only superficial participation from lower level managers. Study Questions Refer to your main text and attempt the following exercises: (a) Exercises 9.21 to 9.29 on pages 398–400 (b) Exercises 9.30 to 9.12 on pages 400–401 (c) Exercises 9.34 to 9.39 on pages 402–404 (d) Problems 9.46 and 9.47 on pages 407–408 Now attempt the past examination questions to reinforce your understanding of this topic. Frequently Asked Questions None 35
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STUDY GUIDE BMAC5203 ACCOUNTING FOR DECISION MAKING Glossary of Important Terms A list of important terms and brief explanations can be found in the Glossary section of your main text. Please refer to pages 731 to 738. If the explanations are unclear, learners are advised to refer to an English/ Bahasa Malaysia Accounting dictionary. 36
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STUDY GUIDE BMAC5203 ACCOUNTING FOR DECISION MAKING Week 7 Topic 7: Planning and Control: Flexible Budget Readings Mowen, M. M., Hansen, D. R., & Heitger, D. L. (2009). C ornerstones of managerial accounting (3rd ed.). South-Western Cengage Learning. Chapter 11 (page 460–482) e-Content (a) Download PowerPoint slides (lecture 7) from myVLE (Group Tool) and read through the notes before you attend the next seminar. (b) Download past examination questions from OUM’s digital library and do the questions relevant to this topic. Study Notes The learning outcome: Prepare a flexible budget and use it for performance reporting (a) A static budget is a budget for a particular level of activity. (b) A flexible budget enables a firm to compute expected costs for a range of activity or enables to flex the original budget to actual activity level. (c) When preparing the flexible budget, all variable costs are flexed to actual activity level, whilst fixed cost remain the same. (d) The difference between flexible budget and actual costs are referred to as variances. Refer to Illustrations 11.2 and 11.3 on page 465 and 466 respectively. 37
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STUDY GUIDE BMAC5203 ACCOUNTING FOR DECISION MAKING Study Questions Refer to your main text and attempt the following exercises: Problems 11.46 to 11.49 on pages 494 to 497. Now attempt the past examination questions to reinforce your understanding of this topic. Frequently Asked Questions None Glossary of Important Terms A list of important terms and brief explanations can be found in the Glossary section of your main text. Please refer to pages 731 to 738. If the explanations are unclear, learners are advised to refer to an English/ Bahasa Malaysia Accounting dictionary.
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