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1 Training 1
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What is a budget?
A budget provides a comprehensive overview of planned company operations. -
What are benefits of budgets?
- Budgets provide an opportunity to re-evaluate existing activities and evaluate new ones.
- They aid managers in communicating objectives and coordinating actions across the organization
- Budgeting provides benchmarks to evaluate subsequent performance
- Budgets provide an opportunity to re-evaluate existing activities and evaluate new ones.
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What are the factors that limit the advantages of budgeting?
- Low levels of participation in the budget and a lack of acceptance of responsibility for the final budget.
- Incentives to lie and cheat in the budget process. (dysfunctional incentives)
- Difficulties in obtaining accurate sales forecasts
- Low levels of participation in the budget and a lack of acceptance of responsibility for the final budget.
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What are dysfunctional incentives?
Lyring, cheating: budgetary slack -
What is budgetary slack?
Is the overstatement of budgeted costs to create a goal that is easier to achieve -
What is a sales forecast?
Is a prediction of sales under a given set of conditions. -
2 Training 2
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Name the several types of different types of budgets.
- Strategic plan (5 years)
- Long-range planning
- Master budget (1 year)
- Capital budget
- Continuous budget 1 year (-1 month+1 month)
- Strategic plan (5 years)
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What is a strategic plan?
This sets the overall goals and objectives of the organization. THe strategic plan leads to long-range planning, which produces forecasted financial statements for five- to ten -year periods. -
What is a long-range plan?
Therse are coordinated with capital budgets, which detail the planned expenditures for facilities, equipment, new products and other long-term investments. -
What is the master budget?
The master budget is a detailed and comprehensive analysis of the first year of thelong-range plan. Itsummarized the planned activities of allsubunits of an organization.
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