Discussion
In this discussion we will explore the human factors that play a part of the budgeting process. As you have learned this week, budgeting is an integral part of the profit planning process; however, if top management expresses a lukewarm attitude towards the budget, then lower level employees are likely to express that attitude too. Conversely, if management places unrealistic expectations on the profit planning, or harsh punishments for not meeting budget forecasts, then lower-level employees are likely to do whatever is necessary to meet targets in an effort of self-preservation. Successful profit planning therefore requires a balance between not placing enough emphasis on the importance of the budget and too much emphasis on it.
Discussion Questions
Please respond to the following questions in your initial post:
•What is meant by "gaming the system" with regards to a budget?
•What, in any, is the advantage to overestimating expenses and underestimating revenue in the budget?
•Under what circumstances would a budget be a good tool for planning and control? Why?
•What is the best way to make a budget irrelevant?