Please list the three major objectives of budgeting.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Requirement 1:
Please list the three major objectives of budgeting.
Requirement 2:
ABC Manufacturing has just hired a new controller. During her first week on the job, the controller was asked to establish a budget for operating expenses in 20Y6. Since the controller was not yet familiar with the operations of ABC Manufacturing, she decided to budget these expenses using the same procedures as the prior controller. Therefore, in order to establish a budget for operating expenses, the controller started with actual operating expenses incurred in 2017 and added 4.3%. Diana based this percentage on inflation as measured by the consumer price index. Please comment on the effectiveness of the controller's budgeting strategy.
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