ACTG 2020 Chapter Notes - Chapter 9: Asteroid Family, Profit Motive, Cost Driver
2 May 2017
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Budgets" dual role: planning and controlling: planning involves developing objectives and preparing various budgets to achieve them, control involves steps taken by management to increase likelihood that objectives will be met. Helps analyze alternatives considered before consuming resources necessary to implement them: communicate management"s plan throughout organization better understanding by employees of goals/objectives. Force managers to think about and plan for future. Provide a means of allocating resources to different parts of organization to maximize effectiveness: can uncover potential bottlenecks before they occur identify demands placed on all key activities/processes. Coordinate activities of entire organization by integrating plans of various areas. Define goals and objectives that can serve as benchmarks for evaluating subsequent actual performance. Managers should be held responsible for only those items they have power to influence. Must have someone responsible for each cost. Allows organization to reach quickly and appropriately to deviations from plan. Method of preparing budgets in which managers prepare own budget estimates.
