Budgetary Slack and Control

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  • Topic: Budget, Hoboken, New Jersey, John Wiley & Sons
  • Pages : 1 (281 words )
  • Download(s) : 23
  • Published : December 8, 2012
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1. What is budgetary slack? What incentive do managers have to create budgetary slack? Budgetary slack is when “managers intentionally underestimate budgeted revenues or overestimate budgeted expenses in order to make it easier to achieve budgetary goals” (1020). Managers have an incentive to do this to give them a little more rope when dealing with the budget. By giving the budget some slack they can give themselves a little room in achieving their goals, rather than simply dealing with a hard number. Also, if managers feel that the budget that is set is unrealistic or unfair, they may feel discouraged and uncommitted to the budget, so having a little more room to work can prevent such discouragement from taking place.

Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2010). Accounting principles (9th ed.). Hoboken, NJ: John Wiley & Sons, Inc.

1. (a) What is budgetary control?

(b) Greg Gilligan is describing budgetary control. What steps should be included in Greg's description?

A.) Budgetary Control “takes place by means of budget reports that compare actual results with planned objectives “ (1062). B.) When Greg is describing budgetary control, he needs to include the following steps.

1. Identify the name of the budget report, such as the sales budget or the manufacturing overhead budget. 2. State the frequency of the report such as weekly or monthly. 3. Specify the purpose of the report

4. Indicate the primary recipients of the report.

All of these steps are essential for people to understand when Greg is attempting to describe budgetary control.

Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2010). Accounting principles (9th ed.). Hoboken, NJ: John Wiley & Sons, Inc.
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