ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting
A manufacturing company's board sets a budget so that the sales, production and purchasing managers each work towards the same overall targets rather than pursuing separate goals. Which purpose of budgeting does this illustrate?
This illustrates coordination. Coordination means aligning the activities of different departments, such as sales, production and purchasing, so they work towards common organisational targets instead of pursuing conflicting separate goals.
- ACoordinationCorrect
- BAuthorisation
- CMotivation
- DControl
Explanation
Coordination means ensuring the activities of different departments are aligned with each other and with overall organisational targets. Motivation concerns inspiring managers to achieve targets, and control concerns comparing actual with planned results. Authorisation concerns giving managers approval to spend.
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