Paper F2 Management Accounting 2019/4/25
Chapter 17 Making budgets work 2019/4/25
Behavioural implication Performance evaluation Chapter Preview Making budgets work Motivation Behavioural implication Negative reaction Participation Performance evaluation 2019/4/25 Ji Weili, JXUFE
Behavioural implications of budgeting Design and run a budgetary system which will go some way towards ensuring goal congruence achieved. Motivation Poor attitude when setting budgets. Poor attitude when implementing budgets. Negative effects Pay Pay can be an important motivator. 2019/4/25 Ji Weili, JXUFE
Participation in budgeting Budget-setting styles imposed (top down) participation (bottom up) negotiated 2019/4/25 Ji Weili, JXUFE
Top-down budgeting Advantages Disadvantages Top management prepare a budget with little on no input from operating personnel Advantages Disadvantages 2019/4/25 Ji Weili, JXUFE
Bottom-up budgeting Disadvantages Advantages Budgets are developed by lower-level managers who then submit the budgets to their superiors. Disadvantages Advantages 2019/4/25 Ji Weili, JXUFE
Negotiated style of budgeting In top-down budgeting, operational managers will try to negotiate with senior managers. In bottom-up budgeting, senior managers usually review and revise budgets presented to them. 2019/4/25 Ji Weili, JXUFE
Performance evaluation Three sytle of evaluation -- budget constrained -- Profit conscious -- Non-accounting Budgetary slack—the difference between the minimum necessary costs and the costs built into the budget or actually incurred. 2019/4/25 Ji Weili, JXUFE
Setting the difficulty level of a budget Expectations budget one for planning and decision making, based on reasonable expectations Aspirations budget one for motivational purposes, with more difficult targets 2019/4/25 Ji Weili, JXUFE
The Mangement Accountant & Motivation What are the right things to do for the management accountant? 2019/4/25 Ji Weili, JXUFE
Let’s close this chapter! End of Chapter 17 Let’s close this chapter! 2019/4/25 Ji Weili, JXUFE