1. Paper F2 Management Accounting
2019/4/25

2. Chapter 17 Making budgets work
2019/4/25

3. Behavioural implication Performance evaluation
Chapter Preview
Making budgets work
Motivation
Behavioural implication
Negative reaction
Participation
Performance evaluation
2019/4/25
Ji Weili, JXUFE

4. 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

5. Participation in budgeting
Budget-setting styles
imposed (top down)
participation (bottom up)
negotiated
2019/4/25
Ji Weili, JXUFE

6. 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

7. 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

8. 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

9. 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

10. 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

11. The Mangement Accountant & Motivation
What are the right things to do for the management accountant?
2019/4/25
Ji Weili, JXUFE

12. Let’s close this chapter!
End of Chapter 17
Let’s close this chapter!
2019/4/25
Ji Weili, JXUFE