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)

Page 2 of 3

Question Two (word limit: 400 words)

Describe the importance of entry barriers in an industry.  Provide four examples of barriers to


(6 marks)

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).

(4 marks)

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