Required

(a)

(i)Explain how the budgeting process helps top managers articulate

decisions about the use of resources.

(ii) Explain how a budget identifies the resources available to individual

departments within an organisation.

(b)

(i)Explain why the cost of resources such as labour and direct materials is

uncertain. Include the effects of market forces in your discussion.

(ii)Explain how changes in the price of resources such as labour and direct

materials might cause managers to change the way those resources are

used.

(iii) Explain how the issues you discussed in parts (i) and (ii) can result in

budget variances.

(c)

(i) Explain how budgets can be used to measure organisational performance.

(ii) Explain how each of the following budget adjustments improves

measurement of variances when evaluating the performance for individual

managers within an organisation:

(I) Using flexible budgets to adjust for actual volumes

(II) Removing allocated costs

(III) Updating costs for anticipated price changes

(iii) How can the analysis of budget variances lead to continuous improvement

in an organisation?