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Principles of Accounting, Volume 2: Managerial Accounting

Thought Provokers

Principles of Accounting, Volume 2: Managerial AccountingThought Provokers

Thought Provokers

TP 1.

LO 7.1Why is a clear understanding of management’s goals and objectives necessary for effective budgets?

TP 2.

LO 7.1It is proper budgeting procedure to begin with estimated revenues, but why might some nonprofit entities begin planning their expenditures instead of their revenues?

TP 3.

LO 7.2How would a human resources department use information in the operating budgets?

TP 4.

LO 7.2How would maintenance departments use information in the budget?

TP 5.

LO 7.2How might service industries predict revenue?

TP 6.

LO 7.4The management of Hess, Inc., is developing a flexible budget for the upcoming year. It was not pleased with the small amount of net income the budget showed at all sales levels and is contemplating using a less expensive material. This action reduces direct material cost by $1 per unit. What would be the effects on financial statements and a flexible budget if management takes this approach? Are there other factors that need to be considered?

TP 7.

LO 7.4When would a static budget be effective in evaluating a manager’s performance?

TP 8.

LO 7.5If management is being evaluated on their ability to manage a budget, what can they do to increase cash flow?

TP 9.

LO 7.5If management is being evaluated on their ability to manage a budget, what can they do to decrease cash outflow?

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