BU247 Lecture Notes - Lecture 19: Sunset Provision, Cash Flow Statement, Cash Flow
Document Summary
Bu247 lecture #19: using budgets for planning and coordination. In the short run: capacity-related costs are fixed, the only relevant costs are controllable costs, which are variable costs, the budgeting process determines the planned level of most variable costs. If budget planning indicates that the organization"s sales potential exceeds its manufacturing potential, then the organization can develop a plan to put more capacity in place or to reduce planned sales. The elements of budgeting: budgeting involves forecasting the demand for four types of resources over different time periods, flexible resources that create variable costs, resources that, in the intermediate and long run, enhance the potential of the. Intermediate-term capacity resources that create fixed costs organization"s strategy: long-term capacity resources that create fixed costs. Behavioural considerations in budgeting: game playing is inherent in the budgeting process if budgets are used to evaluate actual performance, managers have the incentive to misrepresent their information.
