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Chapter 22: Q4RQ (page 1228)

What is budgetary slack? Why might managers try to build slack into their budgets?

Short Answer

Expert verified

Budgetary slack means higher expectations for estimated expenses and least expectations for estimated revenues.

Step by step solution

01

Meaning of Budgetary Slack

Budgetary slack is an intentional buffer in the budgetscreated by the management to get better actual results than the budgeted. There aretwo waysto build slacks in the budget,lower estimations of all the incomesorhigher estimations of all the expenses.

02

Managers tried to build slack into their budgets

Building a slack into the budgets might increase the actual performance than the budgeted, and then they will receive a good evaluation. Adding slack can result in less efficient planning and control. It affects the company’s overall performance.

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Most popular questions from this chapter

Question: One benefit of budgeting is coordination and communication. Explain what this means.

Connor Company began operations on January 1 and has projected the following selling and administrative expenses:

Rent Expense $ 1,000 per month, paid as incurred

Utilities Expense 500 per month, paid in month after incurred

Depreciation Expense 300 per month

Insurance Expense 100 per month, 6 months prepaid on January 1

Determine the cash payments for selling and administrative expenses for the first three months of operations.

Question: Meeks Company has the following sales for the first quarter of 2019:

January February March Cash sales \( 5,000 \) 5,500 \( 5,250 Sales on account 15,000 14,000 14,500 Total sales \) 20,000 \( 19,500 \) 19,750 Sales on account are collected the month after the sale. The Accounts Receivable balance on January 1 is $12,500, the amount of December’s sales on account. Calculate the cash receipts from customers for the first three months of 2019.

What is sensitivity analysis? Why is it important for managers?

Match the following statements to the appropriate budgeting objective or benefit: developing strategies, planning, directing, controlling, coordinating and communicating, and benchmarking.

1. Managers are required to think about future business activities.

2. Managers use feedback to identify corrective action.

3. Managers use results to evaluate employees’ performance.

4. Managers work with managers in other divisions.
See all solutions

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