...give managers a clear vision of targets to achieve in a year. (Montana and Charnov, 2000) Today Budgets are used by almost all companies as its use allows the managers to establish the objectives of the business in quantitative terms which is usually for a year. Budgetary control is a system of management control in which actual income and spending are compared with planned income and spending, so that you can see if plans are being followed and if those plans need to be changed in order to make a profit. (Financial Times) The major aim of any organization is to create wealth for their shareholders for that they need to make plans and the major plan for it is budgets. Budgets are also heavily linked to the strategy as budgets plan the future of an organization they must be implemented in the strategy of the organization. “A strategy can be viewed as describing how an organization matches its own capabilities and opportunity in the market place to accomplish its overall objectives.”(Bhimani 2012) The budget of an organization shows its financial capabilities and it must be prepared according to the long term strategy of the organization. This essay will hence examine the advantages and limitations of budgetary control and its effect on performance management. Organisations in the modern day comprise of many different departments that must have proper coordination and communication in order to achieve growth and profits. A budget is a mere translation of a company's strategic...
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...Budgetary control is the process by which financial control is exercised by managers preparing budgets for revenue and expenditure for each function of the organization in advance of an accounting period. It involves the continuous comparison of actual performance against the budget to ensure the plan is achieved or to provide a basis for its revision. The first disadvantage of budgetary control system is costly. The costs of compiling data and analyzing budgets are another disadvantage of the budgetary control process. Other forms of corporate control rely more directly on the opinions and judgment of senior officials. Budgetary control seeks to moderate this type of human judgment by introducing quantitative arguments, all of which come at a cost. When a business uses its existing operating budgets and financial statements to perform budgetary control, the cost is reduced. However, when leaders commission new financial reports, these costs rise, especially if they require hiring new employees to assist the accounting department. Another disadvantage of budgetary control is that it relies heavily on numerical data, sometimes at the expense of other useful information. For example, a department head who operates under her budget for the quarter may appear successful in a budgetary control analysis. However, if she saved money by reducing her staff and terminating skilled workers, the action may have a more negative, intangible effect on the business as a whole. Decisions...
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...Abstract Over the years many companies have been established with one sole purpose. That sole purpose is financial gain. Many of these companies fail at obtaining financial gain because of lack of planning and poor management. There are steps to follow when creating a system to monitor and control various activities at different levels or divisions. This paper will talk about the concept and benefits of having a budgetary control system. The Concept Budgetary Control In order for a company to operate successful, it is important for the company to evaluate its financial status on a weekly, monthly and/or quarterly basis. In order to do so a budgetary control reporting system must be created. This system identifies which type of budget reports will be created to compare the actual financial activity of the company with the projected activity, when each report will be evaluated, and what information will be obtain from the reports. Once reports are analyzed by executives and managers try to determine what may have caused the budget variance as well as trying to correct the problem to improve the outcome. Budget Formats and How They Are Used The type of budget format used for a company depends on how the company wants to analyze its financial activity. The two budget formats are static and flexible. Static budget reports are used by an company that analyzes its financial activity as a whole. Many companies use a static budget report when creating a master budget...
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...APPENDIX 1: LIST OF RISKS ASSOCIATED WITH PROCUREMENT RISKS ASSOCIATED WITH PROCUREMENT The following list of risks associated with procurement were identified by the Technical Services Office from audit findings in Annual Audit Reports of the Commission on Audit: 1. Projects have been unused Warning signs: • No Bids and Awards Committee (BAC) • The BAC has no Technical Working Group (TWG) • The BAC has no Secretariat or Inexperienced BAC Secretariat • No feasibility study conducted • The project was not included in the Annual Procurement Plan (APP) • Right-of-Way (ROW) not unavailable 2. Claims and payments made on early accomplishments were bloated; the contractor eventually abandoned the project 3. Unnecessary work items 4. Incorrect deductions of retention from progress payments due to failure to validate conformance with project schedule 5. Advance payment not recouped or not fully recouped 6. Ghost project 7. Defective project 8. Unauthorized honoraria of BAC Members, BAC TWG and BAC Secretariat 9. Excess construction materials not turned over to the Government 10. Scrap materials / Salvaged construction materials not turned over to the Government 11. Sub-standard or poor quality of work Causes: • Approved Budget for the Contract (ABC) not realistic • The BAC failed to conduct proper post-qualification 12. Excessive project cost Causes: • Inadequate detailed engineering activities • Overestimated quantities of work items • Overestimated quantities of materials • Overestimated...
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...submit proposed budgets for sales, production and inventory.levels,& expenses. Capital expenditure request also are formalised at this time. he expense budget include direct labour and all factory overheads items, separated into fixed and variable componets.Direct materials are budgeted seperatly in developing the production and inventory schedules.The expense budgets for each division are developed from each plants results, as measured by the % variation from an adjusted budget in the first six months of the currrent year and at arget expense reduction % established by the corporation to determine plant % the plant budget for just completed half year period is revised to recognise changes in operating procedures and cost outsid the control of management(eg labour wage rate changes & product sytle changes).The difference between the revised budget and thee actual expenses is controllable variance , expressed as a % of the actual expenses if un favourable , this expense is added to the corperate target expense reduction %.A favourable plant variance % is subtracted from the corperate target. if a plant had 2% unfavourable contrallable variance the corporate target reduction was 4% , the plants budget for next year should reflect cost proxmately 6% below this year actual cost . Next years final budget for the corporation , its division , and plants are adpoted after coporate analysis of the proposed budgets and a carefull review with each division manager will be changes made...
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...CHAPTER 10 Budgetary Control and Responsibility Accounting ASSIGNMENT CLASSIFICATION TABLE Learning Objectives 1. Describe the concept of budgetary control. Evaluate the usefulness of static budget reports. Explain the development of flexible budgets and the usefulness of flexible budget reports. Describe the concept of responsibility accounting. Indicate the features of responsibility reports for cost centers. Identify the content of responsibility reports for profit centers. Explain the basis and formula used in evaluating performance in investment centers. Explain the difference between ROI and residual income. Questions 1, 2 Brief Exercises Do It! Exercises 1 A Problems B Problems 2. 3, 4, 5 1, 2 1, 2, 8, 10 3A 3B 3. 6, 7, 8, 9, 10, 11, 12 3, 4, 5 1, 2 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 1A, 2A, 3A 1B, 2B, 3B 4. 13, 14, 15, 16, 17, 18, 24 19 6 13 6A 6B 5. 9, 11, 14 6. 20, 21 7 3 15, 16 4A 4B 7. 22, 23, 24 8, 9, 10 4 16, 17, 18, 19 5A 5B *8. 25, 26 11, 12 20, 21 7A 7B *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix to the chapter. Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solution Transparencies (For Instructor Use Only) 10-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number 1A Description Prepare flexible budget and budget report for manufacturing...
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...Basik 2013858268 MARA University of Technology Samarahan BM 701 Preview of Chapter 10 How budgets are used by management to control operations. Focuses on two management control : I. aspect of budgetary control; and II. responsibility accounting Preview of Chapter 10 Budgetary Control and Responsibility Accounting Budgetary Control Budget report Control activities Reporting System Static Budget Reports Examples Uses and limitation Flexible Budgets Why flexible budgets Development Case study Reports Responsibility Accounting Controllable vs noncontrollabe Performance Evaluation Reporting System Types of Responsibility Centers Cost Centers Profit Centers Investment Centers The content and organization chart of Chapter 10 Learning Objectives Describe the concept of budgetary control. Evaluate the usefulness budget reports. of static Explain the development of flexible budgets and the usefulness of flexible budget reports. Describe the concept of responsibility accounting Indicate the features of responsibility reports for cost centers. Identify the content of responsibility reports for profit centers. Explain the basis and formula used in evaluating performance in investment centers Learning Objectives Describe the concept of budgetary control. Evaluate the usefulness budget reports. of static Explain the development of flexible budgets and the usefulness of flexible...
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...make his/her own decision. A control system is required to improve and consolidate control in their operating, revenue and cost activities. Budgetary control is described as the process of planning, controlling, coordinating and motivation through money values and departments within an organization. (Ryan, 2007) Budgetary control is a major feature of management control system in most organisations. The use of budgetary control in performance management has become more significant especially as a more integrative control mechanism in most organisations (YÜCEL and GÜNLÜK, 2007). Thus, this essay will assess the claim on the effectiveness of the budgetary control as a more integrative control mechanism for the organisations and how non-financial performance tool can be used to complement the budgetary control to provide accurate reporting on the performance of the organisation. Organisational and Budgetary Control In an organisation, the goals and objectives may differ in within each department, division and individual. It is important that every individual has to change their behaviour towards achieving organisation’s objective. (Flamholtz, Daz and Tsui, 1985). The organisation’s primary objective is to earn profits. The management uses financial measurement tools such as Economic Value Added (EVA), financial ratios, residual income and Master Budgets etc to measure the performance of each division as well as motivation and control. (Otley, 1999 & 2002) ...
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...Vershire Company & Aluminum Industry Industry of Aluminum Aluminum. Less spillage or breakage, ease of storage at home or when people travel, maintenance of soft drink carbonation, ease of lithograph and ease of recycling, aluminum production is one of the modern era’s great economic stories. The world’s primary aluminium industry produces over millions ton of aluminium metal per year. The most important markets for aluminium products are the transport, building and packaging sectors, however aluminium also finds application in electrical and mechanical engineering, office equipment, domestic appliances, lighting, chemistry and pharmaceuticals. The United States aluminum industry is the worlds largest, annually producing about $.1 billion in products and exports. U.S. companies are the largest single producer of primary aluminum. The U.S. industry operates over 00 plants in 5 states , produces more than billion pounds of metal annually and employs over 145,000. Aluminum is one of the few products and industries left in America that truly impacts every community in the country, either through physical plants and facilities, recycling, heavy industry, or consumption of consumer goods. The aluminum industrys performance is noteworthy, particularly in light of the proliferation of alternative materials and global competition. Transportation represents the largest market for aluminum in the United States. In 000, transportation accounted for .5 percent of all US...
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...to maintain position through security needs by task-related activities. After taking the LSI survey my primary and secondary styles of thinking fall under aggressive/defensive thinking. My limiting style of thinking falls under passive/defensive thinking. My primary thinking style, power, measures your self-worth to a degree that we can control and dominate others. Power thinkers lack confidence in others and try to establish their feelings of self-importance. Power thinkers are characterized to be aggressive and to have a rigid way of thinking. Power thinkers have a high need for control, power, prestige, and status. Power thinkers dictate the actions of others and they are threatened by undermined authority. Consequently, the qualities I found to be true about me regarding power is that I have a lot of aggression, lack confidence in others, and I have a high need of control and influence. At work I like to influence my coworkers to strive high and push towards things that they will improve their lives. I like to try and control my relationships and daily activities. Also, I have a tendency of trying to control situations that I have no control over. Furthermore, I disagree with the power style characterization. I use power to keep my daughters in line and my life in order. I...
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...levels are at analyzing the environment? 2. “To manage transactions with the organizational environment effectively, managers should chart the forces in the organization’s specific and general environments, noting (a) the number of forces that will affect the organization, (b) the pattern of interconnectedness or linkages between these forces, (c) how rapidly these forces change, and (d) the extent and nature of competition, which affects how rich or poor the environment is.” (Managerial Implications, p. 73) Conduct a specific analysis of Yahoo’s environment, identifying each of the 4 factors listed above. 3. “Taking that analysis, managers should plan how to deal with contingencies. Designing inter-organizational strategies to control and secure access to scarce and valuable resources in the environment in which they operate is the first state in this process” (Managerial Implications, p. 73) 4. How is Resource Dependence Theory illustrated in Yahoo’s relations with its environment? 5. Illustrate the concepts of symbiotic and competitive interdependence, using Yahoo’s case history. Did Yahoo effectively manage its interdepencies? 6. As a consumer, how would you rate Yahoo against its major competitor Google? Why? Part I. Identification of Problems (2-4 pages) Using only the information provided in the case, identify and explain the problems that the company is having. In...
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...Telstra suffered from an embarrassing situation which risked losing its position of dominance. The main reason for this is that its management structure, that is, classical management. The report will argue that the problem of classical management and offer a recommendation for this situation. From this case, it is clearly to identify the management problem is that classical management. There are some facts, which can prove this. One of the fact is that the organization assets were privatised in a way that allowed the organization to function as a monopoly. In addition, another fact is that Telstra block competitors' access to the network. Both of these examples emphasize Telstra aimed at controlling others. Telstra control market by controlling competitors in order that it is a monopoly. According to William C, the classical management focus is controlling others(1992). In terms of investment, Telstra invest $300 million in upgrading network, and they want to get all providers to use this network. This means Telstra maximize return on investment, they also focus on short-term goals. William C stated that the classical management revolves managers are seen as keepers of scorecards who manage toward short-term goals and they maximize return on investment(1992). All of this facts are in accordance with classical management models. In view of the above-mentioned facts, a recommendation is provided. Telstra should adopt new paradigm management. According to William C, the...
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...the storage of products, and their primary purpose is to maximize the usage of available storage space. Distribution centers emphasize the rapid movement of products through a facility, and they attempt to maximize the throughput. 4. Cross-docking is a process where a product is received in a facility, occasionally married with product going to the same destination, then shipped at the earliest opportunity, without going into long-term storage. This could affect warehousing design as cross-docking is more desirable by allowing more receiving and outgoing delivery doors, or a bigger floor space to handle more product movements. 6. The advantages of private warehousing are: cost is spread over more units of inventory, more control over storage needs, control over product placement within the facility, and access to product whenever the company needs. A few disadvantages are: initial cost is very high, fluctuating demand means loss of productive space, high interest rates cause more cost for financing, and a reduction in the company’s flexibility in relation to their external environment. 11. The trade-off between order-picking versus stock-replenishing is: keeping both teams working on the same floor at the same time will save on managerial personnel being needed, it will also cause congestion. 18. To start with, hazardous materials means that enhanced security focusing on people, facilities, and processes must occur. Secondly, proper documentation and signage needs to be able...
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...INTRODUCTION Every human been has several needs and desires. But no individual can satisfy all his wants. Therefore, people work together to meet their mutual needs which they cannot fulfill individually. Moreover, man is a social being as he likes to live together with other people. It is by working and living together in organized groups and institutions that people satisfy their economic and social needs. As a results there are several types of groups, eg..; family, school, government, army, a business firm, a cricket team and the like. Such formal groups can achieve their goals effectively only when the efforts of the people working in these groups are properly coordinated and controlled. The task of getting results through others by coordinating their efforts is known as management. Just as the mind coordinates and regulates all the activity of a person, management coordinates and regulates the activities of various members of an organization. Every organization, regardless of size, has developed and implemented its own management in order for it to run smoothly and accomplish the vision, goals and objectives it has set forth. As such, the basic function of management, broken down into four different areas, allow for it to handle strategic, technical and operational decisions for the organization. The four function of management are: planning, organizing, directing and controlling. PLANNING Planning is the core area of all function of management. It is the foundation...
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...in our Contemporary Management textbook, our class was assigned to determine if Mr. Edens’ behavior was ethical and acceptable or unethical and unacceptable. Secondly, we needed to provide the rationale for our answers and provide examples. Mr. Edens has created a highly controlled workplace with close manager supervision and surveillance. Even though I don’t agree with this environment, I think Mr. Edens’ behavior has been ethical and acceptable. Lockbox Processing: No Place to Hide Mr. Edens’ company, Electronic Banking System Inc., specializes in “lockbox processing.” Due to the sensitive nature of this financial service, Mr. Edens has implemented many controls to monitor his employees. Workers handle thousands of dollars in checks and cash, and thus they need to be monitored closely. These controls are designed to limit theft which reassures customers that their money is safe. Managers sit at the front of the room on raised platforms; other supervisors watch employees from the rear. While some may consider this approach intrusive, these techniques exist in many workplaces today where employees come in direct contact with money. Mr. Edens’ employees work in an area called “the cage.” No talking is permitted, the windows are covered, and many common items that workers usually have at their desks are banned. Mr. Edens is able to monitor this environment with a series of eight cameras which have the ability to zoom in closer on employee’s activities. Personally...
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