Co s t a n d m a n a g e m e n t a c c o u n t in g - i i

Assignment
Name:- yoseph Berhane section:- A
1. What is a budget? What is budgetary control?
-is a predetermined statement of managerial policy during the given period
which provides a standard for comparison with the results actually
achieved. It is the sum of money allocated for a particular purpose and the
summary of intended expenditures along with proposals for how to meet
them. A budgetary control is a system of used to ensure that an
organization's actual revenues and expenditures adhere closely to its
financial plan.
2. Discuss some of the major benefits to be gained from budgeting.
-Means of allocating resources
-Think about and plan for the future
-Define goals and objectives
3. What is meant by the term responsibility accounting?
- Managers should be held responsible for those items - and only those items
that they can actually control to a significant extent. Responsibility accounting
enables organizations to react quickly to deviations from their plans and to
learn from feedback.
4. What is a master budget? Briefly describe its contents.
-is a business strategy that documents expected future sales, productions levels, purchases, future
expenses incurred, capital investments, and even loads to be acquired and repaid. In other words,
the master budget includes all other financial budgets as wells as a budgeted income statement and
balance sheet. The master budget is basically management’s strategic plan for the future of the
company. Every aspect of the company operations is charted and documented for future
predictions.
5. Why is the sales forecast the starting point in budgeting?
-serves as the starting point for all activities of the firm and gives direction
to all activities. It helps the firm to decide which produces are to be
continued, which ones are to be dropped, which ones are to be added, and
which need modification. It enables the firm to identify its precise position
in the market, this, in turn, facilitates optimum utilization of resources,
optimum penetration of markets, and optimum gains from marketing
opportunities.
6. “As a practical matter, planning and control mean exactly the same thing.”
Do you agree? Explain
-No they are different
 Planning –
involves developing objectives and preparing various budgets to achieve
those objectives
Controling –
involves the steps taken by management to increase the likelihood that the
objectives set down while planning are attained and that all parts of the
organization are working together toward that goal.
7. What is a self-imposed budget? What are the major advantages of self-
imposed budgets?
-A self-imposed budget or participative budget is one where each person
with responsibility for cost control prepares his or her own budget estimates
and submits them to the next higher level of management. This process
empowers the managers to create their own self-imposed budgets. It’s a
method of preparing budgets in which managers prepare their own budgets.
These budgets are then reviewed by the manager’s supervisor, and any
issues are resolved by mutual agreement.
Advantages
1. The creation of a team environment where everyone knows their views and
judgements are valued by company management.
2. When a front-line manager assists in the preparation of their own budget,
they have working knowledge and are able to more accurately estimate
expenses for their area.
3. When you, as a manager, get to prepare your own budget, you are more
motivated to set goals that are attainable, yet challenging. There is a higher
level of commitment when participation is involved.
4. If you as a manager try to attain a goal set by someone else, especially if
that someone does not know the intricate workings of your department, it
can be easy to just say that the goals were unattainable. When you set your
own goals, you can’t make that claim!
8. What caution must be exercised in their use?
• It may result in dissatisfaction, defensiveness and low morale among
employees, who must implement the budget.
• The feeling of team spirit might vanish.
• The acceptance of organizations goals and objectives could be limited
• The sense of the budget as a punitive tool could arise.
• Unachievable budget for overseas divisions may be imposed on local
divisions if consideration is not given to the local operating and political
environment.
9. How can budgeting assist a company in planning its workforce staffing level
-planning is about working out the needs of the business . What workforce
it needs to move forward towards its aims and objectives. For example a
business wants to open a new factory in Arba Minch will it need Addis
 Ababa's staff to move or will it take in new staff from all over Ethiopia to
work at the new factory. Do these people needs special skills? for example to
be bilingual or to be ICT literate etc. For a large company this can be a
difficult task. The role of budgeting is to control the cost of the project.
10. “The principal purpose of the cash budget is to see how much cash the
company will have in the bank at the end of the year.” Do you agree?
Explain.

-The primary purpose of a cash budget, also known as a cash flow projection,
is to help you plan and strategize to be able to cover upcoming expenses. The
process of listing anticipated expenses and anticipated cash on hand, and then
comparing the two amounts, enables you to see where you may come up short,
and it provides you with a time frame for developing a solution. Cash budgets
are, of necessity, based on speculation. However, the more realistic your
numbers, the better they will help you plan. Therefore, I agree that the
principal purpose of cash budget is to know how much cash the company has
will have at the end of the year and what happened to the cash inflows as well
as outflows.