Answered: the advantages of

Business

Accounting

the advantages of

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 10DQ

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

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1.Explain the advantages of encouraging employee participation in budget setting.

2.Explain why zero based budgeting might be a useful tool to employ to ensure that budgetary requirements are kept up to date

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Which of the following is true in a bottom-up budgeting approach? Every expense needs to be justified. Supervisors tell departments their budget amount and the departments are free to work within those amounts. Departments budget their needs however they see fit. Departments determine their needs and relate them to the overall goals.
Why is a clear understanding of managements goals and objectives necessary for effective budgets?
When would a static budget be effective in evaluating a managers performance?
Which approach requires management to justify all its expenditures? A. bottom-up approach B. zero-based budgeting C. master budgeting D. capital allocation budgeting
Explain the advantages of encouraging employee participation in budget setting. 2.Explain why zero based budgeting might be a useful tool to employ to ensure that budgetary requirements are kept up to date
Practice 3 : a) Explain the importance of incentive systems for motivating performance. b) Identify and explain the components of management compensation and the tradeoffs that compensation designers make. c) What is meant by the term flexible budget? What role do flexible budgets play in evaluating performance?
A budget represents a target and aiming towards a target can be a powerful motivator. However, whether the target will actually cause employees to do better is thought to depend on how difficult the target is perceived to be. Required Evaluate the motivational considerations that should be made in the setting up of a budgetary planning and control system.
1. Which of the following is an advantage of the budgeting process? a. It forces management to focus on the past and not be distracted by the day-to-day operations of the business. b. It can communicate to employees specific information about their past performance to determine their promotion prospects. c. It can communicate to employees specific information about their past performance to determine their promotion prospects. d. It can communicate to employees information about their performance expectations in the period ahead. 2. Which one of the following statements regarding changing inventory costing methods is true? a. A change in inventory methods can be justified if the change is made to better match profits with revenue b. Changing inventory costing methods violates comparability c. One place that the reader of an annual report would be able to identify that a company changed inventory costing methods is the statement of shareholders' equity d. Changing inventory costing…
Which of the following is true in a bottom-up budgeting approach? a.Supervisors tell departments their budget amount and the departments are free to work within those amounts. b.Departments determine their needs and relate them to the overall goals. c.Every expense needs to be justified. d.Departments budget their needs however they see fit.
Explain why zero based budgeting might be a useful tool to employ to ensure that budgetary requirements are kept up to date
(3) Explain the ethical considerations as it relates to using budgets as a basis for rewarding managers? (4)Explain three specific benefits that a system of budgetary planning and control may bring to an organization.
Which of the following is NOT true of the budgeting process? Question 8 options: Budgeting provides feedback to management to aid in assessing how well it's reaching its goals. Budgets force managers to plan for the future. Budgets force managers to consider relations among operations across the entire value chain. The performance report is prepared as part of the master budget.