BUS 630 Week 4 DQ 1 Behavioral Aspects of Budgeting

1
BUS 630 Week 4 DQ 1 Behavioral Aspects of
Budgeting To purchase this material
link http//www.assignmentcloud.com/BUS-630/BUS-6
30-Week-4-DQ-1-Behavioral-Aspects-of-Budgeting
Norton Company, a manufacturer of infant
furniture and carriages, is in the initial stages
of preparing the annual budget for next year. 
Scott Ford has recently joined Nortons
accounting staff and is interested to learn as
much as possible about the companys budgeting
process.  During a recent lunch with Marge
Atkins, sales manager, and Pete Granger,
production manager.  Ford initiated the
conversation below. Read the conversation and
answer the questions that follow.  Respond to at
least two of your fellow students
postings.Ford Since Im new around here and am
going to be involved with the preparation of the
annual budget, Id be interested to learn how the
two of you estimate sales and production
numbers.
2
Atkins We start out very methodically by looking
at recent history, discussing what we know about
current accounts, potential customers, and the
general state of consumer spending.  Then, we add
that usual dose of intuition to come up with the
best forecast we can. Granger I usually take
the sales projections as the basis for my
projections. Of course, we have to make an
estimate of what this years ending inventories
will be, which is sometimes difficult.  Ford Why
does that present a problem? There must have
been an estimate of ending inventories in the
budget for the current year. Granger Those
numbers arent always reliable because Marge
makes some adjustments to the sales numbers
before passing them on to me. Ford What kind of
adjustments? Atkins Well, we dont want to fall
short of the sales projections so we generally
give ourselves a little breathing room by
lowering the initial sales projection anywhere
from 5 to 10. 
3
Granger So, you can see why this years budget
is not a very reliable starting point.  We always
have to adjust the projected production rates as
the year progresses and, of course, this changes
the ending inventory estimates.  By the way, we
make similar adjustments to expenses by adding at
least 10 to the estimates I think everyone
around here does the same thing. a.  Marge Atkins
and Pete Granger have described the use of what
is sometimes called budgetary slack.      i. 
Explain why Atkins and Granger behave in this
manner and describe the benefits they expect to
realize from the use of budgetary slack.    
ii.  Explain how the use of budgetary slack can
adversely affect Atkins and Granger. b.  As a
management accountant, Scott Ford believes that
the behavior described by Marge Atkins and Pete
Granger may be unethical.  By referring to the
IMAs Statement of Ethical Professional Practice
in chapter 1, explain why the use of budgetary
slack may be unethical. For more courses visit
our website http//www.assignmentcloud.com/