Establishing Budgeted Amounts

question 66

Essay

Establishing budgeted amounts
(a)The text discusses two basic philosophies as to the levels at which budgeted amounts should be set.Identify and describe briefly each of these two philosophies.
(b)Which of the two management philosophies would be more likely to elicit the following comment?
"At our company,budgeted revenue is set so high and budgeted costs so low that no department can ever meet the budget.This way,department managers can never relax;they are motivated to keep working harder no matter how well they are already doing."

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Definitions:

Production

The process of creating goods and services through the combination of labor, materials, and technology.

Lead Time Reduction

A strategy aimed at reducing the time taken from initiating a process to its completion, often used to enhance operational efficiency.

Cost-Saving

A reduction in expenses that increases net income and cash flow, which can be achieved through various methods like improving efficiency or negotiating better terms with suppliers.

Processed Item

An item that has undergone a series of actions or steps to bring it to a specified state, often referring to manufactured or packaged goods.