Budget motivates employees when it serves as a target, and reward is linked towards target accomplishment....

  

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Budget motivates employees when it serves as a target, and reward is linked towards target accomplishment. However, politics and game-playing associated with target setting may cause conflict between performance evaluation and budget planning purposes. Discuss the politics and game-playing in this conflicting situation. Provide an illustration that associates the resulting dysfunctional behaviour with the budgeting process. Part B (20 Marks) Tip Top Driving School offers driving lessons in a small town. The driving school's owner and manager has been attempting to evaluate performance and control costs using a variance report compares the planning budget to actual results. A recent variance report appears below: TipTop Driving School Performance Report For the Month Ended June 30th 2023 Planning Budget Lessons 150 Actual Results 155 Variances Revenue RM33,000 RM33.900 RM 900 F Expenses: Instructor wages 9,750 9,870 120 U Automobile depreciation 5,700 5,890 190 U Fuel 2,250 2,750 500 U Maintenance 2,330 2,450 120 U Ground facility expenses 1,550 1,540 10 F Administration 3.390 3.320 70 F Total expense 24.970 25,820 850 U Net operating income RM 8,030 RM 8,080 RM50 F The planning budget was developed using the following formulas, where q is the number of lessons offered: Revenue Instructor wages Automobile depreciation Fuel Maintenance Ground facility expenses Administration Cost Formula RM220q RM65q RM38q RM154 RM530 + RM12q RM1,250+ RM2q RM3,240 + RM1q After several months of using such performance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in June, but the report shows an unfavourable variance. Required: a) Revise the performance report for the school for June 2023. b) Evaluate the school's performance for June 2023. Budget motivates employees when it serves as a target, and reward is linked towards target accomplishment. However, politics and game-playing associated with target setting may cause conflict between performance evaluation and budget planning purposes. Discuss the politics and game-playing in this conflicting situation. Provide an illustration that associates the resulting dysfunctional behaviour with the budgeting process. Part B (20 Marks) Tip Top Driving School offers driving lessons in a small town. The driving school's owner and manager has been attempting to evaluate performance and control costs using a variance report compares the planning budget to actual results. A recent variance report appears below: TipTop Driving School Performance Report For the Month Ended June 30th 2023 Planning Budget Lessons 150 Actual Results 155 Variances Revenue RM33,000 RM33.900 RM 900 F Expenses: Instructor wages 9,750 9,870 120 U Automobile depreciation 5,700 5,890 190 U Fuel 2,250 2,750 500 U Maintenance 2,330 2,450 120 U Ground facility expenses 1,550 1,540 10 F Administration 3.390 3.320 70 F Total expense 24.970 25,820 850 U Net operating income RM 8,030 RM 8,080 RM50 F The planning budget was developed using the following formulas, where q is the number of lessons offered: Revenue Instructor wages Automobile depreciation Fuel Maintenance Ground facility expenses Administration Cost Formula RM220q RM65q RM38q RM154 RM530 + RM12q RM1,250+ RM2q RM3,240 + RM1q After several months of using such performance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in June, but the report shows an unfavourable variance. Required: a) Revise the performance report for the school for June 2023. b) Evaluate the school's performance for June 2023.