Budgeting
Irina Vanessa Lintermanns Verschüer
A01200345
September 26, 2011
Homework: Questions of budgeting
1. Discuss some of the major benefits to be gained from budgeting.
It motivates the executives to define the basic objectives of the company, it gives a structure to the company by defining the responsibilities of each of the parts that forms the organization, it motivates and rises the participation of all workers of the company, it obligates to maintain a control document with historical data, it facilitates managers the use of resources, and it gives periodic evaluations and analysis.
2. What is meant by the term responsibility accounting?
It explains that a company must be decentralized or separated into manageable parts. These parts, or segments are referred to as responsibility centers that include: revenue centers, cost centers, profit centers and investment centers. This approach allows responsibility to be assigned to the segment managers that have the greatest amount of influence over the key elements to be managed. These elements include revenue for a revenue center (a segment that mainly generates revenue with relatively little costs), costs for a cost center (a segment that generates costs, but no revenue), a measure of profitability for a profit center (a segment that generates both revenue and costs) and return on investment (ROI) for an investment center (a segment such as a division of a company where the manager controls the acquisition and utilization of assets, as well as revenue and costs).
3. “ As a practical matter, planning and control mean exactly the same thing”. Do you agree? Explain
Yes because in this case planning is determining the actions that must be carried out and express them in monetary units. Then you need to indicate when they must be effectuated so that the actions can be measured to have control over them. A manager must have control over all the resources, actions, time, etc. that are taken into account
A01200345
September 26, 2011
Homework: Questions of budgeting
1. Discuss some of the major benefits to be gained from budgeting.
It motivates the executives to define the basic objectives of the company, it gives a structure to the company by defining the responsibilities of each of the parts that forms the organization, it motivates and rises the participation of all workers of the company, it obligates to maintain a control document with historical data, it facilitates managers the use of resources, and it gives periodic evaluations and analysis.
2. What is meant by the term responsibility accounting?
It explains that a company must be decentralized or separated into manageable parts. These parts, or segments are referred to as responsibility centers that include: revenue centers, cost centers, profit centers and investment centers. This approach allows responsibility to be assigned to the segment managers that have the greatest amount of influence over the key elements to be managed. These elements include revenue for a revenue center (a segment that mainly generates revenue with relatively little costs), costs for a cost center (a segment that generates costs, but no revenue), a measure of profitability for a profit center (a segment that generates both revenue and costs) and return on investment (ROI) for an investment center (a segment such as a division of a company where the manager controls the acquisition and utilization of assets, as well as revenue and costs).
3. “ As a practical matter, planning and control mean exactly the same thing”. Do you agree? Explain
Yes because in this case planning is determining the actions that must be carried out and express them in monetary units. Then you need to indicate when they must be effectuated so that the actions can be measured to have control over them. A manager must have control over all the resources, actions, time, etc. that are taken into account