This paper explores how a flexible budget can affect the performance outcome of a company. The performance outcome of a firm’s operations depends on various factors of events, which occurs throughout an accounting period. These factors that have an impact on a firm’s performance and profit levels, consists of internal and external variables. While some variations are important to a firm’s operations, others can cause major problems for the company. Therefore, in order to be prepared for unforeseen issues, managers can be proactive by establishing a flexible budget. This paper examines how decision making and prior planning by managers can minimize the negative impact on a firm’s performance outcome.
Operational Management: Flexible
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Choose the most logical course of action. Based on the information collected, managers decide that due their product lines winter and summer, and bikes and ski gear, New York will be the optimum location to expand their operations.
5. Monitor activities and progression frequently. As time progresses, managers should monitor the firm’s progress as well as its competitors in the general location.
In conjunction with the operational control system, managers can develop a flexible budget, to minimize the shortfalls, due to both internal and external factors (Beckett & Doamekpor, 2011). Along with a flexible budget plan, managers are able to view the firm’s long term goals for the period and possibly envision some departmental needs, which may result in the reallocation of resources to support those areas (Kirby, 2003). Furthermore, reallocations of resources are likely to influence divisional managers’ behavior, whereas optimal utilization of these resources are achieved (Al-Ramadan, 2014). The use of a flexible budget is to make adjustments for revenues and expenses, measure against the actual output levels achieved and it is useful during short financial performances (Blocher et al, 2013). Huang (2012) added that the method identifies the differences and similarities between the original budget and the current output level. A flexible budget and standard cost, allow managers to subdivide the total operating income variance for the period, into component variances related to each of the five factors mentioned above (Blocher et al, 2013). In the next section, an analysis of the Ortiz & CO manufacturing, presents a flexible budget, master budget, an interpretation of the results and a summary of the
Smith & Brown currently use Budgets and review meetings to measure performance and short-term financial targets to drive performance. Budgets use conventional performance measures which are focused on financial aspects where it seeks to explain the financial consequences of actions and decisions through the use of variance analysis, but it can not identify the causes or the source of bad financial performance. However, non-financial information has proven to address this problem, and has been incorporated in the balanced scorecard to help businesses measure its performance more effectively by providing management with information about what could be causing inefficiency in the production cycle and what could be the source of bad performance
Is the current economic environment forcing managers into a difficult position? The slowing of the general economy or industry-specific economic conditions decreases sales while increasing bad debts and obsolete inventory. The operating performance decline is amplified by the reversals of prior-period accruals based on recent experience. The original accounting estimates were made under very different economic conditions. As the economy or industry slows, managers may find it increasingly difficult to meet the earnings objectives set during the boom times.
Budgets has been widely used by a lot of organizations since it was first introduced, because it can helps managers to properly plan and control the business’s resources. Successful control mechanisms as Schick believes are the essential to budgetary development (Gray, Jenkins, and Segsworth, 2002, p.11). However, recently the use of budgets to control organizations has been the subject to criticise and debate (Hansen et al., 2003 cited in Libby and Lindsay, 2010). In this era that full of unpredictable environments has make it even harder for a business to achieve the targets set in the budgets. In fact, European surveys also reported that there has been a growing dissatisfaction among organizations about their budgeting system (Neely et al.,
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
Budget Report As a prerequisite to writing my budget reporting paper, I interviewed Mrs. Dalina McGee, R.N., who’s a nurse manager of the medical unit at McAlester Regional Health Center. Mrs. McGee has been a manager for the unit for two corresponding year while also managing two the manager for two other units in the hospital, which are rehab and geriatric psych. As a nurse manager for the three units in this hospital, Mrs. McGee has assumed to train and educate her staff nurses, recruit and hire, coordinate patient care and manage department budgets. As her role in budgeting, she prepares a budget, collect data, plan activities and services, implement the plan and evaluate the outcomes.
In addition, this will also help answer many questions, such as the need for a system/process to decrease the number of commutes, the need for a budget on mileage and/or the need for salaries to be increased to compensate for those miles, the need for an allowance for rental cars for clients to use to eliminate the mileage employees are putting on their cars and the amount of money that is being paid out for that mileage, and etc. In Managerial Accounting, it is very important that the company receives the correct information. In chapter 23 of Horngren’s Accounting it states, “flexible budget summarizes revenue and expenses for various levels of sales volume within a
Participative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead of merely being imposed. The idea behind this sort of budgeting is to assign responsibility to subordinate managers and place a form of personal ownership on the final budget. Nearly two decades of management accounting research has resulted in equivocal findings on the consequences and effects of participative budgeting (Lindquist 1995). Participative budgeting certainly has various advantages, these include the transferral of information from subordinate to superior increased job satisfaction for the subordinate, budgetary responsibility and goal congruence. Its disadvantages include budgetary slack and negative motivation, however it is the conditions in which participative budgeting takes place determines whether the budgeting process is successful. The conditions are dependent on various factors such as the level of participation, level of subordinate influence, the extent to which budgetary slack takes place, volatility, job related information, and the complexity of the budget.
Monitor and adjust strategies in response to problems in the revitalization process. Every firm has to know how to continually monitor its behavior, in order to be able to learn how to learn.
Quantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).
The purpose of my paper is to discuss the budget process, “make” or “buy” decisions, and nonfinancial performance measures. I will explain what they do and why they are used. They each have a distinct importance and are important for any business. A basic definition of a budget process is “to provide a budget figure for each item” (Schmidt, 2017).
Everyone has their own political leaning and that leaning comes from one’s opinion about the Government. Peoples’ opinions are formed by what the parties say they will and will not do, the amounts they want spend and what they want to save. In macroeconomic terms, what the government spends is known as fiscal policy. Fiscal policy is the use of taxation and government spending for the purposes of stimulating or slowing down growth in an economy. Fiscal policy can be used for expansionary reasons, which is aimed at growing the economy and increasing employment, or contractionary which is intended to slow the growth of an economy. Expansionary fiscal policy features increased government spending and decreases in the tax rates as where contractionary policy focuses on lowering government spending and increasing tax rates. It must be understood that fiscal policy is meant to help the economy, although some negative results may arise.
Education is the key to success in anyone’s life. With good education comes knowledge, honor, and a solid foundation for a career. The “American Dream” that America as a whole prides itself upon states that with hard work and dedication, its citizens will be able to go far. Education is a big part in the accomplishment of that dream. However, currently California isn’t funding education as much as it should while it funds other less important aspects of society. Higher education should be funded more because of rising tuition prices which is discouraging students from pursuing higher education, it is causing students to raise their debt amount, and it interferes with the success of students pursuing careers.
After one month of tracking my income, I have learned a little more about my spending habits. I am already aware of most of my spending habits, and where I most often slip up. A little on the background of my spending, I rarely use cash. There are two reasons why I do this; the first reason is so that I am not tempted to spend bits of money here and there on snacks and small things. The other reason is that so I can more effectively track my spending with less effort. I have two checking accounts to keep this balanced since on the statements it does not say what the money is specifically spent on. I use one card on essentials and school needs, and the other account is more of a lifestyle account. Although I have done this financial tracking in the past, I was able to reaffirm that I still have some areas of weakness in my spending.
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support
Yes, I was being honest when I was charting my spending habits because I haven’t done a budget that lasted a week before, and I wanted to get an estimate of how much I spend in a week. It was an interesting task to be aware of how much I was actually spending by having real numbers to look at in an organized spreadsheet. The spreadsheet itself was very simple and direct which made it easier to analyze. By lying about my spending habits, this assignment would have been counterproductive since I would have been avoiding facing the truth about how much I spent that week. Instead of being dishonest and trying to avoid that amount of money I spent, I was honest when I was charting my expenses since I wanted to get an actual estimate, even if this