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ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting

Which of the following is a purpose of budgeting that is best described as co-ordination?

Co-ordination means making sure that departments such as sales, production and purchasing plan consistently with each other. Targets relate to motivation, comparing actual with plan relates to control, and allocating resources is a separate purpose of budgeting.

  1. ASetting targets that managers are motivated to achieve
  2. BEnsuring the sales, production and purchasing departments plan activities consistently with each otherCorrect
  3. CComparing actual results with planned results to find variances
  4. DAllocating resources to the activities that need them

Explanation

Co-ordination means ensuring that the plans of different departments fit together, for example that purchasing buys what production needs and production makes what sales expects to sell. Setting targets relates to motivation, and comparing actual with plan relates to control. Allocating resources is a separate purpose, resource allocation.

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