National Telephone company has been forced by competition to put much more empha

Question

National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the following steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system?

Implementing the change quickly.

Including in departmental responsibility reports only those items that are under the department

manager's control.

Demonstrating top management support for the budgeting program.

Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations,

are discussed with the responsible managers.

Explanation / Answer

A) Implementing the change quickly. Change too quickly may result in unsupported reaction by the employees. Change should be gradual and have to explain the reasoning to the employees so that the majority of the employee can accept this in the long term. B) Including in departmental responsibility reports only those items that are under the department manager's control. Many items are inter-related, such as price variance and usage variance OR rate variance and efficiency variance. Production department manager should work together with purchasing manager to work together so that the overall variance to the company is the lowest, rather in maximising departmental individual variances. Hope this helps!

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