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.

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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 5P

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