7. The Master Budget You are currently working as a contractor building state of

Question

7. The Master Budget You are currently working as a contractor building state of the art airports. One of the managerial accountants of the company you work for comes to talk to you about the budget for a project on which you have taken the lead. He wants to know your estimate for the cost of the project. You know that your future with the company depends on your performance in relation to this budget. Your best guess for this project is that it will cost $2,000,000. What do you say to your boss and why?

Explanation / Answer

Being in a responsible position and delegated with such high responsibility, it is my duty to perform my work to the best of my ability. I have done almost all that is required to carry out this project in the best and cost effective way. Keeping all the factors in view and duely applying prudence I have came out with the conclusion that it will cost $2,000,000.

I believe the cost to be reasonable keeping in view the quality, so that the Company's goodwill remains intact. The project could have been done at a lower cost but we have to compromise with the quality.

The company being a leading one in the industry and having good name for it's high quality work, I would better go with good quality rather than a high profit margin.

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