Expenses To Be Paid For A Certain Period †Myassignmenthelp.Com

Question: Discuss About The Expenses To Be Paid For A Certain Period? Answer: Introducation In other words, it can be said that Budgetary slack is the practice of underestimating revenues or overestimating expenses while preparing a budget. This helps the managers mainly in improving their financial performance (Sallis, 2014). For example, this practice is primarily used in performance appraisals and bonuses which are according to the achievement of these budgeted numbers. Consequence: Employees get a very low incentive for meeting their budgeted goals thus the performance of the organisation falls or is interfered. Companies having stretch goals perform much better as compare to the companies having constant budgetary slack for a number of consecutive years (Kerzner, 2013). Hence, this budgetary slack has a negative consequence on the business. It also affects the profits and competitive position of the company for long term. If the managers of the Nestle who can set expectations very high are allowed input into the budget model, then the chances of budgetary slack to occur is very low. Further, in the cited case of Nestle there is no relation in performance, and bonus plans due to which slack is very less likely to occur (Hill, Jones and Schilling, 2014). In a situation where there is uncertainty about the results to be expected for a period of time the chances of budgetary slack increases. As a result, under such conditions managers while creating budgets become more conservative. If there is no source of reliability, as no historical records for possible results and the budget are created for new product line then also budgetary slack prevails. The organization put a significant level of trust into their management. From CEO to employees, managers contain the full responsibility to ensure that their behaviours and attitude is ethical and have the best of interest of primary as well as secondary stakeholders (Gallani and et al., 2015). Being a manager, it is significant to consider ethical behaviours so as to experience, companys desires for conduct, ensuring right behaviours of subordinates, and to reduce vagueness that mostly arrive while practising ethics. Thus, it vital to consider codes of conduct and ethics, set of regulations and to achieve and maintain records of linked documentation placed for the expectations and framework purposely for ethical behaviour. It is also a responsibility of the manager to certify that those who are responsible for reporting are required to understand these rules. A manager working on ethical behaviour is also duty-bound to set the prospect, and all ethically unsafe practices are disallowed. Any of the members conducting this type act has the duty to report it to an appropriate channel (Douthit and et al., 2016). Managers that continuously make use of Code of Conduct of company or any other same program with the other recognized and expected behaviour offer a base of ethical conduct and belief in their relationship with the stakeholders. Managers have the position in the company to assist the management in accomplishing its strategic goals and objectives. The major thing to consider is the incentive plan is the objective to motivate their team members, and this plays a vital role in the success and growth of the company. There is the existence of a broad range of incentive plans, to assist managers in being focused on activities and drive great opportunities (Daumoser, Sohn and Hirsch, 2016). A mix of incentive plans must be taken by Nestle into account to create a great reward package so it can assist in achievements and retentions. A business entity can make a reduction in budgeting problem in many ways, primarily, it must prevent dependence on budgets as an obstructive and evaluative tool. Next, managers must be provided incentives for attaining their projects on budgets as well as to offer proper and correct projections through adopting Zero based budgeting and by applying these following tools: Pay-for-Performance A knowledgeable management company, APQC made use of researchers in order to identify that paying according to their performance at all levels is the best way in an entity, as this tool is unbiased and by this managers and employees stay motivated and will focus on giving the best performance (Nouri and Kyj, 2014). This model usually includes a paying rate combined with a variable rate which is particularly knotted to the performance of an individual. Best performing managers are normally familiar and amendable to this model; it is because it introduces a precise connection between individuals performance and attainment toward company goals. Stock Options In 2001, more than 30000 diverse options of stocks were used by firms in and around the US. Stock options are formerly an incentive provided especially to a companys best performers. Stock options are generally provided by an employer as an incentive of employee retention (De Baerdemaeker and Bruggeman, 2014). This concept for the stock option is to add value in a specific time period so that employees can be able to sell their stock at proceeds when the designated period of waiting expires. These incentives can inspire and motivate managers to surpass their goals along with the expectation to positively drive the stock value of the company. Recognition Business entities who deeply rely on knowing their achievement of leading managers, often forgot the influences have on impacting performance made by managers. Managers performing at Mid-level might be particularly ignored, as their performance is not visible to upper management (Fullerton, Kennedy and Widener, 2014). Every employee in the management team must be compensated, publicly as well as privately for their performance that goes beyond the expectations. This incentive plan can also include bonus like gifts, certificates, additional vacation days and trophies. Water World is a manufacturing company which is engaged in manufacturing of valves. The company has been manufacturing valve of a particular type since its incorporation. However, now the company has grown the sales to the extent of 50000 valves per month, and they want to expand and manufacture a different variety of valves of water. The present report deals with the issues faced by Water World Company relating to taking a decision regarding a product that whether it should be brought from the market or should proceed for in house production. Management accounting assists in an appropriate manner in applying accounting information for informing themselves in a better manner regarding the decision that they are going to take for the organization (Liu and Kuang, 2014). The same aid them in managing as well as in improving the performance of control function. Water World Company manufactures one kind of water valves till date. However, as the company has achieved major growth, so it wants to manufacture a different kind of water valves. As the workers of the company are not satisfied with their salaries; they kept complaining regarding same and does not perform their operation with efficiency (DRURY, 2013). Marketing manager of the company has expressed bullish prospects towards future, and even finance manager has expressed that the expansion will result in economy of scale and will increase the profitability of products in future. Now, the company wants to ascertain whether it is economical for Water World to buy the product or to manufacture in house. Comparison of both the options (Amount in $) Year 1 2 3 4 5 Sales Quantity 300000 500000 700000 900000 1000000 Direct Wages (per unit) 4 3.60 3.6 3.96 4.356 Total Wages 1200000 1800000 2520000 3564000 4356000 Material Cost 15.4 16.8 18.34 20.034 21.8974 Total Material Cost 4620000 8400000 12838000 18030600 21897400 Power and fuel Cost 2.2 2.42 2.662 2.9282 3.22102 Total Cost 660000 1210000 1863400 2635380 3221020 Indirect Labour (50% of direct labour) 600000 900000 1260000 1782000 2178000 Supervision Salary 55000 60500 66550 73205 80525.5 Total variable cost 7135000 12370500 18547950 26085185 31732946 95871580.5 Machine Cost 500000 Cost in case product is purchased (Amount in $) Year 1 2 3 4 5 Sales Quantity 300000 500000 700000 900000 1000000 Component price from supplier 20 20 22 24.2 26.62 Transportation Cost 2 2.02 2.04 2.06 2.08 Inventory Cost 1 1 1.1 1.21 1.331 Total cost per unit 23 23.02 25.14 27.47 30.031 Total cost 6900000 11510000 17598000 24723000 30031000 90762000 From above analysis, it can be concluded that if the company purchases the product rather than manufacturing the product; it would be more economical for the company. Thus, the company will have to expend less if the IInd option opts, i.e. the product is purchased. Other factors to be considered In a situation where a company wants to make a profit for the long term than it is necessary that efficient management should exist in the company. In the present case of Water World Ltd; the employees are not satisfied with the salaries which have been provided to them and no appropriate management among workers regarding the time they spent on working exist. In these situations, it is impossible to attain predetermined goals. It is necessary that company manager should make efforts to maintain coordination between employees and higher authority (Shields, 2015). Employee motivation is considered to be the constant challenge on the workplace been faced by company. Especially at a workplace where there is no emphasizing of employee satisfaction, and not considering it as a part of a cling and supported business strategy as whole (Liu and Kuang, 2014). On the other hand, they make out their authority in drawing on the best employees have to offer; however, they experience themselves as unsupported, satisfied or familiar on their work to develop motivation further to contributee employees. Regular communication with employees by scheduling staff meeting in order to update them any of the information of company that can influence their work. Feedbacks and reviews of customers, changing of due dates, improvements in commodities, guidance and training and updates on divisions reporting on communicating structures are the significant factors that must be shared with employees (Douthit and et.al. 2016). Communicating and meeting is most significant aspect in any business management. Regular communication with each and every employee is important as it develops more motivation in them, even though a polite good morning can allow the employee to engage with them. Ensuring that the employees are clear about their job, objectives time, efforts and decisions. Organization must pause or stop in those areas which are specially impacted by changes. Further, they should be encouraged for making an efficient effort and should assure that they will be awarded appropriately for the same. In situation where company wants that employees work hard than it is necessary that appropriate award should be rewarded to them in return. By making small changes in organization and payment methods, the company will be able to satisfy employees as well as earn more profits. Conclusion Cited part of study shows that in decision making process it is important for managers to consider financial as well as non-financial factors to ensure its viability and impact on business activities. With this approach sound decisions can be taken by managerial authorities through which better opportunities for growth and high profitability can be attained. Further, human resources is the most crucial asset for business thus managers should be focused to create better work environment for them to keep them motivated so they can contribute for value creation. By considering above description company is required to develop an effective bonus plan for managers by including factors such as Pay-for-Performance, stock options and recognition to motivate them to operate ethically for attaining goals and objectives of business. References Sallis, E., 2014.Total quality management in education. Routledge.' Kerzner, H., 2013.Project management: a systems approach to planning, scheduling, and controlling. John Wiley Sons. Hill, C.W., Jones, G.R. and Schilling, M.A., 2014.Strategic management: theory: an integrated approach. Cengage Learning. Gallani, S., Krishnan, R., Marinich, E.J. and Shields, M.D., 2015. Budgeting, Psychological Contracts, and Budgetary Slack. Douthit, J., Schwartz, S.T., Stevens, D.E. and Young, R.A., 2016. The Effect of Endogenous Contract Selection on Budgetary Slack: An Experimental Examination of Trust, Distrust, and Trustworthiness. Daumoser, C., Sohn, M. and Hirsch, B., 2016. Honesty in Budgeting: A Review of Budgetary Slack. Nouri, H. and Kyj, L., 2014. An Experimental Examination of the Combined Effects of Normative and Instrumental Commitments on Budgetary Slack Creation: Comparing Individuals versus Group Members. InAdvances in Management Accounting(pp. 225-260). Emerald Group Publishing Limited. De Baerdemaeker, J. and Bruggeman, W., 2014. How participation in the strategy development process impacts managers' creation of budgetary slack. InEuropean Accounting Association 37th Annual Congress(p. 168). Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices.Journal of Operations Management,32(7), pp.414-428. Liu, Y. and Kuang, Y., 2014. 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