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Budgeting process, bias adjustment by upper level managers

7-6 Explain the cycle of bias by lower-level managers and bias-adjustment by upper-level managers that can spiral out of control and result in meaningless budgets.

7-11 "Budgeting is an unnecessary burden on many managers. It takes time away from important day-to-day problems." Do you agree? Explain

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Explain the cycle of bias by lower-level managers and bias-adjustment by upper-level managers that can spiral out of control and result in meaningless budgets.

A budget is a detailed schedule of a financial activity, such as sales budget, advertising budget, and cash budget. Budget is prepared after getting the opinion from the lower level employees. Employees at the lower level tend to fix high standard to give sufficient room for their inefficiency. For example, labor hours required for producing one unit is normally 10 and laborers would tend ...

Solution Summary

The cycle of bias by lower-level managers and bias-adjustment by upper-level managers that can spiral out of control and result in meaningless budgets are explained. The solution examines the statement "Budgeting is an unnecessary burden on many managers. It takes time away from important day-to-day problems."

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