Final answer:
The managerial functions associated with budgeting correctly denoted by Option 1 are planning, organizing, directing, and controlling.
Budgeting challenges often involve making difficult choices and balancing opportunity costs. Efficient budget coordination can involve trade-offs between transaction costs and conformity costs.
Step-by-step explanation:
Managerial functions that are commonly associated with budgeting include planning, organizing, directing, and controlling.
Within the context of budgeting, these functions entail setting financial goals (planning), arranging resources to achieve these goals (organizing), guiding employees and operations towards the budgetary goals (directing), and overseeing progress to ensure that the budget is adhered to (controlling).
This aligns with Option 1: Planning, organizing, directing, and controlling.
Budgeting difficulties often stem from a need to make tough choices. To adhere to a budget, you might have to forgo certain discretionary expenses, like coffee shop visits or entertainment subscriptions.
These are enjoyable but represent an opportunity cost. Budgeting requires balancing the satisfaction of immediate desires with long-term financial stability and growth.
When solving coordination problems in budgeting, a balance between reducing transaction costs and conformity costs is required.
Delegating decisions to a manager can streamline processes (lower transaction costs) but might not fully reflect the collective will (higher conformity costs), while collective decision-making processes might be more inclusive (lower conformity costs) but more time-consuming and costly to facilitate (higher transaction costs).