A306 Exam #3
Budget - CORRECT ANSWER-- Budgets are a plan that uses the company's
resources to get from where it is to where it wants to be
- Budgets use a set of assumptions, specify goals and how to achieve them for a
specific period of time
- Everybody uses budgets
- Benchmark for evaluating performance
Why Do Companies Prepare Budgets? - CORRECT ANSWER-- Planning - involves
developing goals and preparing various budgets to achieve those goals
- Control - involves gathering feedback to ensure the plan is working + making
changes as needed and verifying all parts of the organization are working together
towards the goals
Inherent Conflicts with Budgets - CORRECT ANSWER-- Inherent tension between
planning and control that budgets must manage
- Sales manager - keep sales estimates low to "beat the budget" + ensure they
meet/exceed the goal
- Production manager - show costs high so they can "beat the budget" and have
actual costs be lower than predicted ones
- Superstar syndrome - set expectations low (below what is realistic) so you look
better when the actual results exceed expectations
Budget Purposes - CORRECT ANSWER-- Define goals and objectives
- Think about and plan for the future
- Means of allocating resources
- Evaluating performances and provide incentives
- Coordinate activities
- Communicate plans
Communications in Budgets - CORRECT ANSWER-- We tend to stay within our
silos, but each silo impacts another one
- Budget processes coordinate the various business functions (benefit of budgeting
bc communication must happen)
- Requires managers to think of relationships among individual operations,
departments, and the company and as a whole (cross silo)
Budgeting Process - CORRECT ANSWER-- Very involved
- End result is the guide/benchmark for the company
- Wide variation across firms and industries
- Many companies begin with previous budget as a baseline - caution, business as
usual mentality
Budget - CORRECT ANSWER-- Budgets are a plan that uses the company's
resources to get from where it is to where it wants to be
- Budgets use a set of assumptions, specify goals and how to achieve them for a
specific period of time
- Everybody uses budgets
- Benchmark for evaluating performance
Why Do Companies Prepare Budgets? - CORRECT ANSWER-- Planning - involves
developing goals and preparing various budgets to achieve those goals
- Control - involves gathering feedback to ensure the plan is working + making
changes as needed and verifying all parts of the organization are working together
towards the goals
Inherent Conflicts with Budgets - CORRECT ANSWER-- Inherent tension between
planning and control that budgets must manage
- Sales manager - keep sales estimates low to "beat the budget" + ensure they
meet/exceed the goal
- Production manager - show costs high so they can "beat the budget" and have
actual costs be lower than predicted ones
- Superstar syndrome - set expectations low (below what is realistic) so you look
better when the actual results exceed expectations
Budget Purposes - CORRECT ANSWER-- Define goals and objectives
- Think about and plan for the future
- Means of allocating resources
- Evaluating performances and provide incentives
- Coordinate activities
- Communicate plans
Communications in Budgets - CORRECT ANSWER-- We tend to stay within our
silos, but each silo impacts another one
- Budget processes coordinate the various business functions (benefit of budgeting
bc communication must happen)
- Requires managers to think of relationships among individual operations,
departments, and the company and as a whole (cross silo)
Budgeting Process - CORRECT ANSWER-- Very involved
- End result is the guide/benchmark for the company
- Wide variation across firms and industries
- Many companies begin with previous budget as a baseline - caution, business as
usual mentality
