Question
I need help answering question A. C2 1- 45 . Bu dgetary Slack w i th E th ical Co n s i derat i
I need help answering question A.
C21-45. Budgetary Slack with Ethical Considerations LOS
Karen Bailey was promoted to department manager of a production unit in Parkway industries
three years ago. She enjoys her job except for the evaluation measures that are based on the department's budget. After three years of consistently poor annual evaluations based on a set annual budget, she has decided to improve the evaluation situation. At a recent budget meeting of junior-level managers, the topic of budgetary slack was discussed as a means to maintain some consistency in budgeting matters. As a result of this meeting. Bailey decided to take the following steps in preparing the upcoming year's budget:
1. Use the top quartile for all wage and salary categories.
2. Select the optimistic values for the estimated production ranges for the coming year. These are
provided by the marketing department.
3. Use the average of the three months in the current year with poorest production efficiency as,
benchmarks of success for the coming year.
4. Base equipment charges (primarily depreciation on replacement values furnished by the purchasing department.
5. Base other fixed costs on current cost plus an inflation rate estimated for the coming year.
6. Use the average of the ten newly hired employees' performance as a basis of labor efficiency
for the coming year.
A. For each item on Bailey's list explain whether it will create budgetary slack. Use numerical
examples as necessary to illustrate.
Would this be considered budgetary slack? Because, I see providing "optimistic" production numbers as overestimating production. This means the cost of goods, cost of labor, and cost of overhead could will be higher per unit made. Therefore overestimating expenses creating a budgetary slack.
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