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1、Chapter18131CHAPTER18DISCUSSIONQUESTIONSChapter181311.Thefirstgeneralpurposeofbudgetingistoallowindividualsorcompaniestodevelopaplantoachieveaspecificgoal.Thesecondpurposeistoallowongoingcomparisonbetweentheplanandactualresultsinordertobettercontroloperationsoractivities.2.Strategicplanningisthem
2、acro-level,long-rangeplanningoffirmsinwhichmanagementevaluatesresources,weaknesses,constraints,andcompetitionanddecideshow,where,andwhentooperate.Atthestrategicplanninglevel,firmsdecidewhichproductstosell,howtomarkettheirproducts,andhowtheywillrespondtodemandsofgovernmentandconsumergroups,competi
3、tion,andsoon.Capitalbudgetingisplanningfortheacquisitionofproperty,plant,andequipmentthatwillhelpmanagementreachthegoalsoutlinedatthestrategicplanninglevel.Capitalbudgetinginvolvesmakingdecisionssuchaswhichassetstopurchaseandwhethertoleaseorbuy.Operationsbudgeting,orsimply“budgeting,’’istheplanni
4、ngofoperationsforthecomingperiod.Thistypeofbudgetingisusuallyrathershortterm.3.Theadvantagesofatop-downbudgetare:a.Topmanagement,whoknowsthestrategicdirectionofafirm,makesbudgetingdecisions.b.Topmanagementhasnospecialinteresttoprotectandsocanbeobjective.c.Topmanagement,whichinvolvesarelativelysma
5、llgroupofpeople,canmakemoreefficientdecisions.Theadvantagesofabottom-upbudgetare:a.Morepeopleparticipateinthebudget’spreparationsand,therefore,“buyinto’’andsupportthebudget.b.Peoplearebettermotivatedbyabudgettheyhelpprepare.c.Lower-levelmanagersareclosertocustomersandtechnologyand,supposedly,have
6、betterinformationandmaymakebetterdecisions.4.Oneyearisthetypicalbudgethorizonbecauseitcorrespondstotheperiodoverwhichperformancemustbemeasuredfortaxandfinancialreportingpurposes.Sincemanagementwillbeevaluatingitsperformanceoveraone-yearperiod,itisconvenienttohaveabudgetthatcoversthesameperiod.Inp
7、ractice,althoughaone-yearperiodistypicalforamasterbudget,manydetailedbudgetsarepreparedonaquarterly,monthly,orevenaweeklyordailybasis.5.Theaccuracyoftheentiremasterbudgetdependsonareliablesalesforecastbecauseallproduct