Group Assignment
1. Many people believe the budgeting process is wasteful and ineffective. They maintain that managers spend too much time focusing on budgeting mechanics and not enough time on strategic issues. They believe that emphasis on the budgeting process causes managers to neglect more important matters such as eliminating non value adding activities that waste resources. Critics of the budgeting process also maintain that the information and format that managers use in budgets fail to communicate the short term business activities needed to achieve long term goals.
Required:
Prepare a memorandum to your company’s owner justifying the need for budgeting. Also suggest ways to make the budgeting process, the budget information and the budgets themselves efficient, effective and meaningful.
2. Cianna Highway is the manager of the repairs and maintenance department of KJ Industries. She is responsible for preparing her department’s annual budget. Most managers in the company inflate their budget numbers at least ten percent (10%) because their bonuses depend by how much below budget their departments operate. Highway turned in the following information for her department’s 2025 budget to the company’s budget committee:
|
|
Budget |
Actual |
Budget |
|
Supplies |
20,000 |
16,000 |
24,000 |
|
Labour |
80,000 |
82,000 |
96,000 |
|
Utilities |
8,500 |
8,000 |
10,200 |
|
Tools |
12,500 |
9,000 |
15,000 |
|
Handcarried |
25,000 |
16,400 |
30,000 |
|
Cleaning |
4,600 |
4,200 |
5,520 |
|
Miscellaneous |
2,000 |
2,100 |
2,400 |
|
TOTALS |
152,600 |
137,700 |
183,120 |
Because the figures for 2025 are twenty percent (20%) above those in the 2024 budget. The budget committee questioned them. Highway defended them by saying that she expects a significant increase in activity in her department in 2025.
Required:
• What do you think are the real reasons for the increase in the budgeted amount?
• What ethical considerations enter into this situation?