posted by .

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.
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.


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.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. australia's role in united nations

    Outline Australia’s positions and responsibilities in the United Nations australia plays a big role :P australia's role in the united Nations was to ..... not much Hey, it would help heaps if you could andwer this question, What …
  2. Social Studies

    If you accept the fact that Australia is becoming americanized (causing harm) how would this affect australia's international image and realations?
  3. checking world geo

    I don't know the answer for.... Q1)which are closer to the equator, the nomads of the sahara or coffee growers of colombia?
  4. English

    What kind of gift do you want from Australia?
  5. world geogrsphy

    which statement about australia minerals resources is accurate?
  6. sociology

    The United States, Canada, Australia, New Zealand, Japan, and the countries of Western Europe are examples of ____ countries.
  7. Geography

    Which items are described by the geographic theme of place?
  8. math

    new south wales has 1900 km of coastline.this is 10600 km less than western australia,but 100 km greater than victoria.south australia has about twice as much coastline as new south wales,but less than western australia.the northern …
  9. Social Studies

    Was Australia settled first or New Guinea?
  10. social studies- helpppp

    France and Britain were able to avoid the worst of the Great Depression because A) their colonies were required to purchase goods from them.**** B) neither had any significant involvement in international trade. C) the Great Depression …

More Similar Questions