RTL is a retail company that operates 10 stores. Each store has a manager, and there is also a General Manager who reports directly to the Board of directors of the company. For many years the General Manager has set the budgets for each store, and the store managers’ performances have been measured against their respective budgets even though they did not actively participate in their preparation. If a store manager meets his budgeted target, then he is financially rewarded for his performance.

The company has recently appointed a new Finance Director, who has questioned this previous practice and suggested that each store manager should be involved in the preparation of their own budget. The General Manager is very concerned about this. She thinks that the store managers will overstate their costs and resource requirements to make it easier for them to achieve their budget targets.

Explain the problems that could arise, for planning and decision-making purposes within RTL, if the store managers did overstate their budgeted costs and resource requirements.

Use Harvard Style Referencing and not exceed 275 words