CHINHOYI UNIVESITY OF TECHNOLOGY

GROUP ASSIGNMENT PERFOMANCE MANAGEMENT ACCOUNTING

BSCAC LEVEL 4.1

LIBERTY CHIWASHIRA C20142605T

PANASHE MTIZWA C20141987C

MUNASHE ZIMBUDZANA C20141698E

ALDRIN MUGWANIRA C20142198R

WIFRED MUSHANGWE C20143263H

CHIEDZA P MUGWAGWA C20143305H

HAZEL KAZINGACHILE C20143089L

PETRONELLA MUSHAYIKWA C20142736X

LOVENESS KANYANDURA C20141143B

TARISAI MUGURASAVE C20143293D

 QUESTION 22
You have recently been appointed as an assistant management accountant in large
company, Delta Beverages. When you meet the production manager, you overhear him
speaking to one of his staff, saying: “Budgeting is a waste of time. I don’t see the
point of it. It tells us what we can’t afford but it doesn’t keep us from buying it. It
simply makes us invent new ways of manipulating figures. If all levels of management
aren’t involved in the setting of the budget, they might as well not bother preparing
one.
Required
3. Identify and explain six objectives of a budgeting control system. [13 marks]
4. Discuss the concept of a participative style of budgeting in terms of the six
objectives identified in past (a). [12 marks
 Budgetary control system

 It refers to a set of processes and procedures that help organizations to plan, monitor
and control their financial activities by comparing actual results with planned budgets
(RN Anthony, “Planning and Control Systems”, 1965)
 Objective 1: Planning and goal setting

 Budgeting makes sure that managers plans for the future, producing detailed
plans and goal setting in order to ensure the implementation of the long term
plan. Budgeting makes managers look at the year ahead and consider the
changes in conditions that might take place and how to respond to those
changes in conditions. The budgeting process helps in establishing clear
objectives and provides a roadmap of achieving them.
 Objective 2: Coordination and communication

 Budgeting control systems promote coordination and communication within

the organization. The budget serves as a common plan for different
departments and helps in aligning their activities towards common goals. It
encourages collaboration and facilitates effective communication among
managers, enabling them to work together to achieve the organization’s
objective.
 Objective 3: Performance evaluation

 A budgeting control system helps in evaluating and monitoring performance.

By comparing actual results against budgeted targets, management can
identify variances and take corrective actions if necessary. It provides a basis
for assessing the performance of individuals or departments of the
organization for instance, managers and employees will be awarded bonuses
based on achieving budgeted results.
 Objective 4: Establishing a system of control

 Budgetary control system establish mechanisms for control. Expenditure

within the organization needs to be controlled and budget facilitates that.
Actual results are compared to expected results and the reasons for any
significant or unexpected differences are investigated. By setting budgetary
limits and monitoring actual performance, management can exercise control
over expenditures and ensure that resources are used in accordance with the
organization’s plans.
 Objective 5: Motivation and incentives

 Budgets can serve as motivational tools by providing targets and incentives

for employees. When employees have clear objectives and are aware of the
financial implications of their actions, they can be motivated to perform
better and contribute to the organization’s success. Budgets can be used to
establish performance based incentives such as bonuses or rewards which can
drive employee engagement and productivity.
 Objective 6: Resource Allocation

 Budgeting control system aim to allocate resources effectively and efficiently.

Through the budgeting process, management can determine how much
funding should be allocated to each department or activity based on their
priorities and expected outcomes. It enables the organization to make
informed decisions about resource allocation to maximize productivity and
profitability.
 Participative budgeting

 It refers to a budgeting process where there is some level of involvement from

subordinates within the organization, rather than budgets being set by the top level
management as discussed by John Dearden,”Management Control Systems.”
 Planning and goal setting

 Participative budgeting will compel planning. Although participation can take

many forms, often it will take the form of bottom up budgeting, whereby the
participation starts at the lowest level of management and goes all the way
up to the top. If this is the case, then planning is taking place at many levels,
and should be more accurate than if it simply takes place at a high level, by
individuals who are not familiar with the day to day needs of the business.
 Coordinating and communicating activities.

 Coordination of activities may become more time consuming if a participative

style of budget is used. This is because, coordination must not only be
between departments but also be between different levels of management
within each department.
 Communication will be particularly effective with participative budgeting,
although effectiveness depends on the extent of participation. If all levels of
management are involved from the bottom up then all levels of management
know what the plan is.
 Performance evaluation

 Managers will be appraised by comparing the results that they have achieved
to the budgeted results, management can identify variances and take
corrective actions if necessary. It provides a basis for assessing the
performance of individuals, departments and the organization as a whole,
enabling timely adjustments to achieve financial and operational objectives.
Establishing a system of control

 Participative budgeting can enhance control and accountability within an

organization. When managers are involved in the budgeting process, they
have a better understanding of the budget constraints and the need for
control. They are more likely to monitor their own performance and take
corrective actions when necessary. The participative approach also promotes
a culture of accountability, as managers have a stake in the budget outcomes
they helped shape.
 Motivation and incentive

 Participative budgeting can increase employee motivation and engagement.

When managers are involved in the budgeting process, they feel a sense of
ownership and responsibility for the outcomes. This can lead to increased
motivation to achieve budgeted targets as managers have played a role in
setting those targets themselves. Additionally the participative approach
allows for the inclusion of performance based incentives that align the budget
goals.
 Resource allocation

 In a participative budgeting process, managers have the opportunity to

provide input on resource allocation. They can advocate for the resources
they need to achieve their objectives and justify their requests based on their
understanding of the operational requirements. This can lead to fairer and
more informed resource allocation decisions.
 REFERENCES

 (RN Anthony, “Planning and Control Systems”, 1965),

 John Dearden,”Management Control Systems.”
THANK YOU!!!