Monday
September 22, 2014

Homework Help: Accounting

Posted by Jamal on Monday, July 4, 2011 at 2:10am.

Panarude Airfreight is an international air freight hauler with more than 45 jet aircraft operating in the United States and the Pacific Rim. The firm is headquartered in Melbourne, Australia, and is organized into five geographic areas: Australia, Japan, Taiwan, Korea, and the United States. Supporting these areas are several centralized corporate function services (cost centers): human resources, data processing, fleet acquisition and maintenance, and telecommunications. Each responsibility center has a budget, negotiated at the beginning of the year with the vice president of finance. Funds unspent at the end of the year do not carry over to the next fiscal year. The firm is on a January-to-December fiscal year.
After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year. In particular, in the first nine months of the year, expenditure accounts typically show favorable variances (actual spending is less than budget), but in the last three months, unfavorable variances are the norm. In an attempt to smooth out these spending patterns, each responsibility center is reviewed at the end of each calendar quarter and any unspent funds can be deleted from the budget for the remainder of the year. The accompanying table shows the budget and actual spending in the telecommunications department for the first quarter of this year.
----------------------------------------
PANARUDE AIRFREIGHT
Telecommunications Department: First Quarter
Budget and Actual Spending (Australian Dollars)
----------------------------------------
*F = Favorable; U = Unfavorable

At the end of the first quarter, telecommunications’ total annual budget for this year can be reduced by $7,000, the total budget underrun in the first quarter. In addition, the remaining nine monthly budgets for telecommunications are reduced by $778 (or $7,000 ÷ 9). If, at the end of the second quarter, telecommunications’ budget shows an unfavorable variance of, say $8,000 (after the original budget is reduced for the first-quarter underrun), management of telecommunications is held responsible for the entire $8,000 unfavorable variance. The first-quarter underrun is not restored. If the second-quarter budget variance is also favorable, the remaining six monthly budgets are each reduced further by one-sixth of the second-quarter favorable budget variance.

Required:

a)What behavior would this budgeting scheme engender in the responsibility center managers?

b)Compare the advantages and disadvantages of the previous budget regime, where any end-of-year budget surpluses do not carry over to the next fiscal year, with the system of quarterly budget adjustments just described.

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

math, algebra - can someone correct this for me. The pie that i'm using looks ...
please revise my intro - Hello, I am writing a paper for international law ...
English/Please revise - In the United States vs. Fawaz Yunis, five men hijacked ...
English/ please revise - The issue arising out of the Yunis case is the concern ...
English/ please help revise - In the Federal Court case United States vs. Fawaz ...
Physics - A jet aircraft is traveling at 180 m/s in horizontal flight. The ...
Statistics - Fortune magazine publishes an annual issue containing info on ...
math - can someone correct this for me. If the company shipped a total of 550 ...
S.S Check my answers - 1.What Canadian landform covers about half of the country...
grammar - Indentify each sentence as simple, compound, complex, or compound-...

Search
Members