Identify five different functions of a budget
Question One (word limit: 900 words)
Adrian Furniture is a company that manufactures and sells garden furniture. They have been
operating for the past ten years and have a comfortable share of the market. The company has
four divisions, namely the garden shed division, the outdoor table division, the outdoor chair
division and the garden swing division.
Adrian Smith, the CEO of the company, has been reviewing the performance of the company.
Adrian has noticed that the outdoor swing division’s manager, Tomas Miller, has consistently
failed to attain his budget target, while the managers in the other three divisions have always
successfully met their budgets targets. Adrian is perplexed about Tomas’s performance as
Adrian has known Tomas since they were in high school and it was Tomas who suggested
that Adrian should start this business. Without Tomas’s help and support, Adrian would not
have been able to build the company into the successful business that it is today. To recognise
Tomas’s contribution to the business, Adrian made Tomas a shareholder in the company
three years ago.
Concerned that his friendship with Tomas might affect his judgement, Adrian has called you
into his office for an urgent meeting. As the Management Accountant, Adrian has asked you
to investigate the outdoor swing division’s performance.
1) Identify five different functions of a budget. Briefly explain each function (5 mark)
2) Is a division that fails to meet its budget targets less successful than a division that
does? Briefly explain your answer (4 marks)
3) Referring back to your answers to Question One, how do you think Tomas uses the
budget in his division? (2 marks)
4) The managers in the other three divisions are always successfully meeting their
budget targets. Is that a concern? What are the three methods used by managers to
achieve their budgets that are harmful to the company? (4 marks)
(Total: 15 marks)
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Question Two (word limit: 400 words)
Describe the importance of entry barriers in an industry. Provide four examples of barriers to
Question Three (word limit: 300 words)
Identify two of the most successful companies or organizations today, in your opinion.
Explain why they are so successful (your answer should consider business competitive
strategy and core competencies).