Multiple Select QuestionSelect all that applyWhich of the following describe management's use of a master budget: (Check all that apply).Multiple select question.Helps analyze differences between actual and budgeted resultsHelps in determining bonuses to managers who meet budgetsHelps to place blame on managers who do not meet budgetsHelps in planning and control activities
Question
Multiple Select QuestionSelect all that applyWhich of the following describe management's use of a master budget: (Check all that apply).Multiple select question.Helps analyze differences between actual and budgeted resultsHelps in determining bonuses to managers who meet budgetsHelps to place blame on managers who do not meet budgetsHelps in planning and control activities
Solution
The correct answers to the question "Which of the following describe management's use of a master budget" are:
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Helps analyze differences between actual and budgeted results: A master budget is a comprehensive projection of how management expects to conduct all aspects of business over the budget period, usually a fiscal year. The master budget includes interrelated budgets from various departments and is used as a plan for the next period. Therefore, it is used to analyze differences between actual and budgeted results.
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Helps in determining bonuses to managers who meet budgets: In some organizations, meeting or exceeding budget targets can be a factor in determining bonuses for managers. Therefore, the master budget can be used in this way.
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Helps in planning and control activities: The master budget is a planning and control tool. By setting out detailed expectations for revenues and expenses, it provides a basis for comparing actual results with planned results and for analyzing the reasons for any differences.
The statement "Helps to place blame on managers who do not meet budgets" is not a primary use of a master budget. While it's true that managers may be held accountable for not meeting budget targets, the main purpose of a master budget is not to place blame but to plan and control activities.
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