Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 8, Problem 8DQ
Suppose that the vice president of sales is a particularly pessimistic individual. If you were in charge of developing the
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1 i. Discuss the factors that are likely to cause managers to submit budget estimates of sales and costs that do not represent their best estimate or expectations of what will actually occur.
ii. Suggest, as a budget accountant, what procedures you would advise in order to minimize the likelihood of such biased estimate arising.
Should a manager blame his subordinates if a budget target is not achieved? Explain briefly! Give a few lines answer
Which of the following statements relating to budgeting is NOT true?
a) A budget is a formal document that quantifies a company’s plans for achieving its goals.
b) Budgets are useful in the control process because they provide a basis for evaluating performance.
c) A bottom-up approach to budgeting involves substantial input from lower level managers.
d) Most managers believe that budgeting is more successful when a top-down approach rather than a bottom-up approach is used.
Chapter 8 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 8 - Define budget. How are budgets used in planning?Ch. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - What is the master budget? An operating budget? A...Ch. 8 - Explain the role of a sales forecast in budgeting....Ch. 8 - All budgets depend on the sales budget. Is this...Ch. 8 - What is an accounts receivable aging schedule? Why...Ch. 8 - Suppose that the vice president of sales is a...Ch. 8 - Suppose that the controller of your companys...Ch. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Discuss the shortcomings of the traditional master...Ch. 8 - Define static budget. Give an example that shows...Ch. 8 - What are the two meanings of a flexible budget?...Ch. 8 - What are the steps involved in building an...Ch. 8 - FlashKick Company manufactures and sells soccer...Ch. 8 - Refer to Cornerstone Exercise 8.1, through...Ch. 8 - Refer to Cornerstone Exercise 8.2 for the...Ch. 8 - Prob. 4CECh. 8 - Johnston Company cleans and applies powder coat...Ch. 8 - Play-Disc makes Frisbee-type plastic discs. Each...Ch. 8 - Refer to Cornerstone Exercise 8.6. Required: 1....Ch. 8 - Timothy Donaghy has developed a unique formula for...Ch. 8 - Green Earth Landscaping Company provides monthly...Ch. 8 - Coral Seas Jewelry Company makes and sells costume...Ch. 8 - Shalimar Company manufactures and sells industrial...Ch. 8 - Khloe Company imports gift items from overseas and...Ch. 8 - Nashler Company has the following budgeted...Ch. 8 - Refer to Cornerstone Exercise 8.13. In March,...Ch. 8 - Palmgren Company produces consumer products. The...Ch. 8 - Prob. 16ECh. 8 - Crescent Company produces stuffed toy animals; one...Ch. 8 - Audio-2-Go, Inc., manufactures MP3 players. Models...Ch. 8 - Tiger Drug Store carries a variety of health and...Ch. 8 - Rosita Flores owns Rositas Mexican Restaurant in...Ch. 8 - Prob. 21ECh. 8 - Janet Wooster owns a retail store that sells new...Ch. 8 - Historically, Ragman Company has had no...Ch. 8 - Del Spencer is the owner and founder of Del...Ch. 8 - Refer to Exercise 8.24. Del Spencers purchases...Ch. 8 - Ingles Corporation is a manufacturer of tables...Ch. 8 - In an attempt to improve budgeting, the controller...Ch. 8 - Refer to Exercise 8.27. At the end of the year,...Ch. 8 - Olympus, Inc., manufactures three models of...Ch. 8 - Refer to Exercise 8.29. Suppose Gene determines...Ch. 8 - Trumbull Co. plans to produce 100,000 toy cars...Ch. 8 - Which of the following describes the order in...Ch. 8 - A companys controller is adjusting next years...Ch. 8 - A companys sales for the coming months are as...Ch. 8 - The budget that adjusts unit sales for beginning...Ch. 8 - Ponderosa, Inc., produces wiring harness...Ch. 8 - Bernard Creighton is the controller for Creighton...Ch. 8 - Greiner Company makes and sells high-quality glare...Ch. 8 - Prob. 39PCh. 8 - The controller for Muir Companys Salem plant is...Ch. 8 - Refer to Problem 8.40 for data. Required: 1. Run a...Ch. 8 - Norton Company, a manufacturer of infant furniture...
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- Suppose that the controller of your companys largest factory is a particularly optimistic individual. If you were in charge of developing the master budget, how, if at all, would you be influenced by this knowledge?arrow_forwardDiscuss the factors that are likely to cause managers to submit budget estimates of sales and costs that do not represent their best estimate or expectations of what will actually occur and Suggest, as a budget accountant, what procedures you would advise in order to minimize the likelihood of such biased estimate arising.arrow_forwardWhich of the following statements are TRUE? I. Responsibility accounting attempts to assign blame for problems to a specific manager.II. One benefit of a budget is that it helps managers gather relevant information for improving future performance.III. Challenging budgets tend to motivate improved performance.IV. Controllability may be difficult to pinpoint because some costs are the result of the market, not the manager.arrow_forward
- Suggest, as a budget accountant, what procedures you would advise in order to minimize the likelihood of such biased estimate arising.arrow_forwardWhich of the following statements is false? Select one: a. According to responsibility accounting, all managers should be held responsible for all asbects of the master budget. o b. Budgets helps uncover potential bottlenecks. c. Budgeting forces managers to think about and plan for the future. o d. One benefit of following a well-designed budgeting process is Improved performance evaluations. e. Budgeted cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period. Which of the following activities would be classified as a batch-level activity? Select one: a. none of the given answer. b. Designing a new product. c. Milling a part required for the final product. d. Setting up equipment. e. Training employees.arrow_forwardWhat are the major objectives of budgeting? Briefly describe the type of human behavior problems that might arise if budget goals are set too tightly. What behavioral problems are associated with setting a budget too loosely? Why should the production requirements set forth in the production budget be carefully coordinated with the sales budget?arrow_forward
- Is it important for a company to follow a strict budget even though they may be experiencing phenomenal profits? Do you think that there will be a bias towards greed when creating the budget for this company? Explain. How does management greed influence budget decisions? Please consider each of the questions separately in this post. It is important for you to understand the value of the budget as a blueprint for the business – even in times of exceptional “good news”. It is also important to consider the role of greed within the budgeting process of the firm. Perhaps you might want to think about the budget as a communication to employees about what ownership and management believes is its focus. You might even want to see if any other of the exceptional “bad boys” in the business world were reflecting their greed even within their budgeting documents.arrow_forward1(a) "Accounting plays a relatively unimportant role in budgeting." Do you agree? Explain. (b) What responsibilities does management have in budgeting? 2)What is participative budgeting? What are its potential benefits? What are its potential disadvantages? 3)What is budgetary slack? What incentive do managers have to create budgetary slack?arrow_forwardWhich of the following is not a benefit of budgeting? O Provide a way to measure business performance Help managers communicate expectations and quickly. spot deviations Keep managers focussed on financial implications of their business decisions O Provide a way to hire specialized laborsarrow_forward
- Which one of the following is not considered to be a benefit of participative budgeting? When managers set the final targets for the budget, top management need not be concerned with the overall profitability of current operations. Managers are more motivated to reach the budget goals because they participated in setting them. Individuals at all organizational levels are recognized as being part of the team; this results in greater support of the organization. The budget estimates are prepared by those in direct contact with various activities.arrow_forwardWhich of the following best describes the role of top management in the budgeting process? Should be involved only in the approval Should not necessarily have detailed knowledge of the daily operations and should limit their involvement Should be enthusiastic and committed to the budget process Separates the budgeting process and the business planning process please answer immediately :)arrow_forward“Budgets meet the cost–benefit test. They force managers to act differently.” Do you agree? Explain.arrow_forward
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