Skip to content

ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Orlin Group uses a budget-constrained evaluation style: managers are judged mainly on meeting the annual cost budget, with severe consequences for overspending. The environment is highly uncertain and managers have good local knowledge. Which outcome is most likely, and what is the best response?

Rigid budget-constrained evaluation in uncertain conditions tends to cause tension, short-term cost cutting and manipulation of figures. A more flexible, profit-conscious style that allows for uncontrollable factors and explains variances is the better response.

  1. AManagers will be flexible with spending; keep the style unchanged
  2. BManagers may cut discretionary spend or manipulate figures to hit budget; move towards a more flexible, profit-conscious evaluation style with explanation of variancesCorrect
  3. CBudgetary slack will disappear; add more budget lines
  4. DGoal congruence will improve; reduce participation

Explanation

Rigid budget-constrained evaluation (Hopwood) in an uncertain setting often leads to tension, dysfunctional behaviour such as short-termism and data manipulation. A more flexible style that considers uncontrollable factors and long-term performance is more suitable. Adding lines or cutting participation would worsen the pressure rather than relieve it.

Did you get it right without looking?

One question tells you little. A timed set on Budgetary planning and control shows your real accuracy, how long you take and where you lose marks.

Practise Budgetary planning and controlFree diagnostic mock

More Budgetary planning and control questions