Kaplan 1

Question 1

What is budgeting used for

Answer 1

Planning, coordinating, authorising activities of an org.

And for controlling costs

Question 2

What is a simple definition of a budget

Answer 2

A budget is a plan in monetary terms.

Classic concept of a budget is that It takes a plan, which might be in terms of say hours, number of units of sales etc. and turns it into MONEY terms

Question 3

Corporate planning summary

Answer 3

1. Mission - The reason the company exists.
2. Corp Objectives - What it wants to achieve.
3. Strategy - How it intends to get there.
4. Operating Plan - What resources will be required.
5. Control - How well it does compared to plan.

Question 4

Corporate planning detail:

Mission

Answer 4

A broad statement of the overall aims of the org.

Needs to be clearly defined and publicised in & out and will help guide the orgs decision making.

Question 5

Corporate planning detail:

Objectives

Answer 5

Are quantified, time-limited statements of what an org wishes to achieve,

Sales (with ‘reasonable’ profit)
Quality of service
Contented workforce

Traditionally orgs were assumed to be only interested in profit. Now recognised profit is one of many objectives

Question 6

Corporate planning detail:
Strategy
(Win the war)

Answer 6

Strategy is the course of action, including the specification of resources required, that the company will adopt to achieve its specific objectives

Question 7

Corporate planning detail:
Operating Plans
(Win the individual battles)

Answer 7

Are the short-term tactics of the org.

Question 8

Corporate planning detail:

Control

Answer 8

The comparison of the results of the plans and the stated objectives to assess PERFORMANCE

Question 9

Exams require a discussion on whether the budgeting procedures used in an org are likely to achieve their aims.

The aims, and the methods used to achieve them can be broadly categorised as?

Answer 9

1. Efficient management - management by EXCEPTION.
   (variances)
2. Motivation of workforce - RESPONSIBILITY ACCOUNTING.
   The use of budgets as Targets to measure Performance. (cost; revenue; profit (c&r); investment (c, r & i)

Question 10

Simple definition of motivation

Answer 10

The drive or urge to achieve an end result.

Question 11

The use of budgets in responsibility accounting

Answer 11

1. Participating in budget setting.
2. Budgets as motivational targets
3. Performance evaluation & reward.

Question 12

Characteristics of a sound employee reward system

Answer 12

1. Fairness - Reward effort which helps objectives.
2. Motivational - should motivate mgrs to behave congruently
3. Understandability
4. Consistently applied - operate in the same way for all employees (at least at their level)
5. Objective. - measurable, minimum subjectivity. Not open to manipulation.
6. Universal - all employees, all levels should be subject to an appraisal & reward system.

Question 13

Budgetary bias

Answer 13

The manager deliberately sets low rev, high cost targets

Question 14

Goal congruence

Congruent behaviour
Dysfunctional behaviour

Answer 14

The principle of GC involves..

Ensuring that

• all members of the org pull in the same direction
• towards helping the org to achieve its objectives.