Question

a)Analyze the major pros and cons of preparing annual company budgets. Identify at least two (2) critical budget line items that you believe are essential for managing your company. Provide a rationale for your response.

b)One way to monitor a company is to break it into different centers or business units. For example, a Revenue Center oversees the sales teams while the Cost Center focuses on making the product or delivering the services. If the company maintains a store or locations that handles both revenue and costs, this is called a Profit Center. Managers of each center have their own budgets and are held accountable for achieving it. Analyze the most common responsibility reporting systems. From your analysis, argue at least one (1) pro and one (1) con of using responsibility reporting systems.

Answer 1

A. Budgeting is critical in the success of the business. It requires all levels of managemnt to plan ahead and to formalize goals on a recurring basis. Additionally, it provides definitive objectives for evaluating performance, creates early warning system for potential problems anf faciliates the cordination of activities with in the business. It also motivates personnel throughout the organisation to meet planned objectives.

Among all the benefits of budgeting, I think two of the most critical budget items that are essential in managing a company:

1. Budgeting depends on a sound organizational structure.

2. It is directly related to all levels of the management.

B. A responsibility reporting syatem involves the preparation of a report for each level of responsibility in the company organisation chart. This level allows managers at eah level of responsibility to see the controllable costs for their area or department.

There are pros and cons to using this type of reporting system.

Pros include the ability to perform camparative evaluations between department managers and inventives for managers to control their costs. These reports also allow for a better system of control because management can hold one person responsible in eah department.  

One oo the cons to using this type of reporting system is that managers may become discouraged if they are solely being held repsonsible for the performance of others. Employees in various departments may become too competitive if they are constantly being compared to those in other departments.

Another con is that the reports for every department are subject to human error while being prepared. These errors could lead to a larger problem if they are not caught in time.