QUESTION 2 A firm of solicitors is using budgetary control during 2018 The senior partner estimated the demand for the year for each of the firm's four divisions Civil, Criminal, Corporate, and property A separate partner is responsible for each division Each divisional partner then prepared a cost budget based on the senior partner's demand estimate for the division These budgets were then submitted to the senior partner for his approval He then amended them as he thought appropriate before issuing each divisional partner with the final budget for the division He did not discuss these amendments with the respective divisional partners Actual performance is then measured against the final budgets for each month and each divisional partner's performance is appraised by asking the divisional partner to explain the reasons for any variances that occur The Corporate partner has been asked to explain why her staff costs exceeded the budgeted costs for last month while the chargeable time was less than budgeted Her reply is below My own original estimate of staff costs were higher than the final budgeted costs shown on my divisional performance report In my own cost budget I allowed for time to be spent developing new services for the firm's corporate clients and improving the clients' access to their own case files This would improve the quality of our services to clients and therefore increase client satisfaction The trouble with our present system is that it focuses on financial performance and ignores the other performance indicators found in modern performance management systems REQUIRED a Analyze the present budgeting system and its likely effect on divisional partner motivation (10 Marks) b Explain two non financial performance indicators that could be used by the firm (6 Marks) c Many experts argue that organizations should manage by using activity data rather than cost data Evaluate by giving THREE (3) reasons (9 Marks) (TOTAL 25 MARKS)

Question

QUESTION 2 A firm of solicitors is using budgetary control during 2018  The senior partner estimated the demand for the year for each of the firm's four divisions  Civil, Criminal, Corporate, and property  A separate partner is responsible for each division  Each divisional partner then prepared a cost budget based on the senior partner's demand estimate for the division  These budgets were then submitted to the senior partner for his approval  He then amended them as he thought appropriate before issuing each divisional partner with the final budget for the division  He did not discuss these amendments with the respective divisional partners  Actual performance is then measured against the final budgets for each month and each divisional partner's performance is appraised by asking the divisional partner to explain the reasons for any variances that occur  The Corporate partner has been asked to explain why her staff costs exceeded the budgeted costs for last month while the chargeable time was less than budgeted  Her reply is below   My own original estimate of staff costs were higher than the final budgeted costs shown on my divisional performance report  In my own cost budget I allowed for time to be spent developing new services for the firm's corporate clients and improving the clients' access to their own case files  This would improve the quality of our services to clients and therefore increase client satisfaction  The trouble with our present system is that it focuses on financial performance and ignores the other performance indicators found in modern performance management systems   REQUIRED  a  Analyze the present budgeting system and its likely effect on divisional partner motivation  (10 Marks) b  Explain two non financial performance indicators that could be used by the firm  (6 Marks) c  Many experts argue that organizations should manage by using activity data rather than cost data  Evaluate by giving THREE (3) reasons  (9 Marks) (TOTAL  25 MARKS)

Accepted Answer

The Answer is in the image, click to view ...

QUESTION 2 A firm of solicitors is using budgetary control during 2018. The senior partner estimated the

Question:

Management And Cost Accounting

QUESTION 2 A firm of solicitors is using budgetary control during 2018. The senior partner estimated the

Question:

Expert Answer:

The Answer is in the image, click to view ... View the full answer

Management And Cost Accounting

Students also viewed these Accounting questions