QUANTITATIVE METHODS IN BUDGETING

Transcription

1 QUANTITATIVE METHODS IN BUDGETING

2 Quantitative methods in budgeting Edited by C. B. Tilanus tfrfartinus8vijhoff Social Sciences Division CUiden 1976

3 ISBN-13: e-isbn-13: DOl: / Copyright 1976 by H.E. Stenfert Kroese B.V., Leiden Softcover reprint of the hardcover 1st edition 1976 No part of this book may be reproduced in any form by print, photoprint, microfilm or any other means, without written permission from the publisher Photoset in Malta by lnterprint (Malta) Ltd

4 Contents ABOUT THE AUTHORS viii 1. INTRODUCTION C. B. Tilanus, editor 2. PEOPLE AND TECHNIQUES IN BUDGETING 10 G. Hofstede 2.1. The effectiveness of budget control systems The wood and the trees Potential psychological gains in using quantitative methods Quantitative methods in assessing the social aspects of a control system Conclusion BALANCED TRANSFER VALUES IN SCHEDULING, COSTING AND RECOMPENSING 23 A. Klein Haneveld 3.1. Extended introduction and summary Linear programming and accountancy Models of the values as well as the measures of flows Linking objects: transferrers of value Balancing procedures: evaluation of intracompany trade Degrees of freedom and channels of valuation Ancillary interrelations in costing and recompensing Recapitulation RATIO NETWORK MODELS AND THEIR APPLICATION IN BUDGETING 67 C. van der Enden 4.1. Ratio network models Basic ideas Input data Dimensions Relationships Application

5 4.2. Budgeting with the help of the ratio network method Introduction Management activities The budget: basic ideas The budget: flow-chart THE DEVELOPMENT OF A BUDGETING MODEL 92 H. A. Smits and P. A. Verheyen 5.1. Introduction The preliminary phase The conceptual side The general model The first phase The second phase Conclusions with respect to the implementation 96 Appendix 5.1. Mathematical description of the generalized ~ ~ ~ 6. COST ACCOUNTING, PLANNING AND BUDGETING 109 A. Bosman and J. L. Bouma 6.1. Cost functions and product costing The relations between production centres Alternative production methods of economically homogeneous products Planning, linear programming and unit costs Planning, budgeting and costs Example STOCHASTIC BUDGETING 135 T. Kloek and H. A. van der Donk 7.1. Introduction Probability distributions Some specific distributions Relations between the variables Computer program Interval boundaries and policy Concluding remarks 143 Appendix 7.1. Flow-chart of computer program 144 Appendix 7.2. Interval exploitation budget 145 Appendix 7.3. A definition of subjective probability 146

6 CONTENTS Vl1 8. VARIANCE ANALYSIS, FLEXIBLE BUDGETING AND RESPONSIBILITY ACCOUNTING 147 C. B. Tilanus and J. A. M. Theeuwes 8.1. Classical variance analysis The flexible-budgeting approach to variance analysis Multi-stage, multidimensional variance analysis 151 Appendix 8.1. Two-stage, two-dimensional variance analysis with flexible budgeting 155 Appendix 8.2. Algebra and numerical example of two-stage, three-dimensional variance analysis with flexible budgeting WHERE SHORT-TERM BUDGET MEETS LONG-TERM PLAN 159 C. B. Tilanus 9.1. Next year's budget in conflict with first year oflongterm plan Using budget pattern for disaggregation of long-term plan The multiproportional RAS algorithm Taking account of prior information 166 INDEX 169

7 About the authors A. Bosman Born Master's degree in economics 1955; worked in industry until 1962; director of the Institute of Economic Research of the University of Groningen; 1968 associate professor in management science; 1969 Ph.D. thesis on Systems, planning, networks; 1970 professor in management science; is especially interested in the problem area of constructing management information systems. J. L. Bouma Born Education: economic science, University of Groningen. Dissertation: A comparative study of theories of business behaviour (in Dutch), Author of some textbooks on managerial economics and finance. Present research:- information and decision systems in an organization, management control systems. H. A. van dey Donk Born Obtained degrees in economics as of1967, in statistics as of1971. Since 1968 employed as economics assistant at Netherlands Railways, Department of Research and Planning, Utrecht. C. van dey Enden Born Education: Free University, Amsterdam, Faculty of Economics. Publication: Decision Calculations (in Dutch), Function: Head of the Industrial Economics Research Department ofn. V. Philips' Gloeilampenfabrieken, Eindhoven. G. Hofstede Born Master's level degree in Mechanical Engineering from Delft Institute of Technology (1953) and Doctorate in Social Psychology from Groningen University (1967). Doctoral dissertation: 'The Game of Budget Control'. Current activities: Professor of Organizational Behaviour, European Institute for Advanced Studies in Management, Brussels, and Affiliate Professor, INSEAD, Fontainebleau, France. Earlier work experience: ten years in the Netherlands as an industrial worker, engineer, foreman and department manager, six years of behavioural research on the international staff of IBM-Europe, and two years of teaching at IMEDE, Lausanne. Publications, research interest, teaching and consulting activities all related to the impact of the design of large organizations on the behaviour of their members. Present research about the impact of national culture on organizational behaviour. A. Klein Haneveld Born Graduated 1937 in Electrical Engineering at Delft. Had a career of 32 years with the Royal Dutch/Shell. Until 1956 as a geophysicist, mainly in

8 ABOUT THE AUTHORS ix South American countries. Thereafter successively Operations Superintendent of an oil field, head of a Computer Development group, and manager of Data Processing in Venezuela. From 1962 to 1969 senior adviser with the central Management Services at London and The Hague, concerned with investment criteria, planning procedures, and optimization techniques. Since 1970 teacher of Quantitative Methods in Business, at the Twente University of Technology, Enschede. T. Kloek Born Ph.D. in economics, 1966, Netherlands School of Economics (now Erasmus University), Rotterdam. Subject of dissertation: Index Numbers (in Dutch). Joined the Econometric Institute at Rotterdam in Professor of econometrics in the same school since Coauthored (together with H. Theil and J. C. G. Boot): 'Operations Research and Quantitative Economics, An Elementary Introduction' (1965). Published several articles in Econometrica and other econometric and statistical journals. Current subject of interest: nonlinear estimation and its applications. H. A. Smits Born Obtained a degree in economics at Tilburg University. Staff member of the Systems Department at Dutch States Mines (DSM). J. A. M. Theeuwes Born Is a certified accountant, educated at Tilburg University, Department of Economics. He is Assistant Professor of Accounting at Eindhoven University of Technology. Author of various papers published in Dutch accounting journals. His current research interests are in the field of management information systems. C. B. Tilanus Born Education: economics and econometrics. Thesis on 'Input-output experiments'. Worked with Theil at Econometric Institute, Netherlands School of Economics. Industrial experience in chemical and software industries. At present Associate Professor in quantitative economic methods at Department ofindustrial Engineering, Eindhoven University of Technology. A founding editor of the European Journal of Operational Research (first volume 1977). Current interests: linear programming, management games, and the subject matter of this book. P. A. Verheyen Born Education: , Econometrics, Tilburg University. Dissertation: Economics and technics (in Dutch), Functions: : (Coordinator of) Department of Statistics, Dutch States Mines; : Extraordinary Lecturer/Professor, Tilburg University; I 966-present: Professor, Tilburg University; : Dean of the Faculty; : Member of the Board of the University. Publications: About input-output analysis (inaugural lecture, 1967), investment planning (1975), and budget-model for a hospital (1975).