Nolan Company was formed four years ago by Stewart George. It started as a very small company trading in Exotic Spices for the Tourism Market in the Caribbean, but began to expand rapidly. With the growth in the company, George decided to implement a formal budgetary control process. He provided some data and projections to the Companys Management Accountant which the Accountant used to prepare the Master Budget for the Company. The Master Budget was then broken down into departmental budgets. These departmental budgets were distributed to the Department Managers with a cover letter explaining the new budgeting system and requesting the support of everyone in achieving the targets.

Most of the Department Managers were displeased with the budget. They felt that the targets were not realistically attainable.

1. Outline to the Managers of Nolan what is Budgeting and why Budgetary Control is vital to the success of the organization.

2. What type of budgeting approach was used? Explain. What are the advantages and the disadvantages of the approach used, Discuss. What approach would you recommend? Why? Using, practical illustration from your organization.

3. Explain the behavioural implications of the manner in which Nolan Spice and the Companys Management Accountant went about the budgeting process.