1. One problem of setting budgets from the case described.
i. Missing the target – When a budget is set like in the case of XL foods, it is most likely that the targets may not be met.
ii. Lower budgets set for particular activities result into lack of accomplishments. In the case of Mick, the budget was set at a lower value and when he requested for more allocation he could not be granted.
iii. Expenditure increased (the cost of transportation) and since the budget was already set, he could not perform better as the costs were higher that estimated.
2. Importance of comparing budgets with actual figures
i. They help in measuring how an organization is progressing throughout the year
ii. Helps in making adjustments to the company’s expenditure
iii. Helps in reviewing the objectives achieved and setting new goals
iv. Helps in setting up priorities and determining which sectors are underfunded or overfunded
v. Helps to ensure that there is proper allocation of resources
vi. Helps in reducing the risks of overspending
3. How might the differences between the budget and the actual figures be used by managers?
i. They can be used for future planning of the enterprise
ii. They can be used by managers to ensure proper allocation of resources to different sections of the company
iii. They also help the managers in setting up business priorities
iv. They help the management in determining the section of the business that is more profitable than the other.
v. They will help the managers spend up to the budget
vi. Managers will also try to conceal data and make the actual fit the budget
vii. The manager can easily learn about the looming production and distribution bottlenecks.
viii. They help the mangers determine the underperforming sections of the company hence devise means of improving them
