Assignment Description Rahela Manufacturing is a medium-sized company that manufactures and markets a range of products. The divisions of Rahela Manufacturing include whitegoods, kitchenware and outdoor furniture. The senior management team oversees the budgeting process. This includes the managing director, the financial controller, the manufacturing director and marketing director. Jack Kohler, the managing director of Rahela Manufacturing, recognises the importance of the budgetary process for planning, control and motivation. He believes that a properly implemented process of participative budgeting and management by exception will motivate managers and their subordinates to improve productivity within their particular divisions. Based upon this philosophy, Kohler has implemented the following budgetary procedures:  A target sales revenue and target profit figure is determined by the senior management team and given to each divisional manager for the following budget year. Profit targets are based on targeted overall increases in returns to shareholders, and are assigned to divisions based on senior management’s expectations of which divisions need to improve in the coming year. Target sales revenues are based on a percentage increase in the prior year's sales revenue for each division.  Divisional managers develop their individual divisional budgets within the following constraints, as directed by the company financial controller: - The target sales revenue and profit targets can only differ by 10 per cent, and this deviation must be clearly justified by the divisional manager. - All fixed commitments should be included in the budget. Fixed expenditures include such items as long-term supplier contracts and salaries. - All capital expenditure projects that are undertaken in divisions, at the direction of the senior management team, should be included in the divisional budgets. - An estimate of head office charges is provided to divisions for incorporation in their budgets. - Divisional budgets need to specify all line items for expenditure.  The final divisional budgets are approved by senior management, after careful scrutiny by the senior management team. Sometimes, as an incentive to motivate divisional managers, the estimated office charges are increased, which has the effect of reducing budgeted divisional profits. Divisional managers are then asked to review their overall budgets, to find areas of cost savings to meet their profit targets.  The final budget is used as the basis of control for a management-by-exception form of reporting. Excessive expenditures by each division are highlighted on a monthly basis. Divisional managers are expected to account for all expenditures over budget. Financial responsibility is an important factor in the overall performance evaluation of all managers. Kohler believes that the policy of allowing the divisional managers to participate in the budget process and then holding them accountable for the final budget is essential, especially in times of limited resources. He further believes that the divisional managers will be motivated to increase the efficiency and effectiveness of their divisions because they have provided input into the initial budgetary process and are required to justify any unfavourable performance. Requirements: 1. Discuss the advantages and limitations of participative budgeting with relevant research references. 2. Identify deficiencies in Rahela Manufacturing's budgetary process. Recommend how each identified deficiency can be corrected. 3. Define and explain the negative consequences of budgetary stack. Do you think that participative budgeting can help in this regard? 4. Give your opinion whether you can find any relevance of ethics in participatory budgeting process.MA 515 Managerial Accounting Page 4 of 6 Lasted Updated: November, 2019 This assignment must be written/structured in the form of a ‘business report’. That is, it must have a/an; (a) Executive summary (between 75 to 100 words), (b) Introduction that; Succinctly summarizes this assignment’s topic and its key issues, controversies, etc. (no more than 100 words), and (c) Body that addresses all the requirements – see above requirements 1-4 (no more 1250 words), (d) Conclusion that sums up the mains issues of this assignment (no more than 100 words), and (e) Reference list containing all cited works. (f) Proper English Grammar, appearance, format, etc.