Family Resorts, Inc., is a holding company for several vacation hotels in the northeastern and Mid-Atlantic states. The firm originally purchased several old Inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the Inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable.

Family Resorts has just concluded its annual meeting of regional and district managers. This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions as appropriate. These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2008 budget has been presented at the meeting and the managers accepted it.

To evaluate the performance of its managers family resorts uses responsibility accounting. Therefore, the preparation of the budget is given close attention at headquarters. If major changes need to be made to the budgets that the managers submitted, all affected parties are consulted before the changes are incorporated. The two figures designated Problem 15 presents 2 reports from the budget booklet that all managers received at the meeting.

Required:

1. Responsibility accounting has been used effectively by many companies, both large and small.

• Define responsibility accounting.
• Discuss the benefits that accrue to a company using responsibility accounting.
• Describe the advantages of responsibility accounting for the managers of the firm.

2. The regional and district managers accepted Family Resorts' budget. Based on the facts presented, evaluate the budget process family resorts employs by addressing the following:

• What features of the budget presentation shown are likely to make the budget attractive to managers?
• What recommendations, if any, could be made to the budget preparers to improve the budget process? explain your answer.