Reference no: EM133000680

Question - Budgeting is, no doubt, a core organizational function that drives a substantial part of corporate activities. You work for HeadCo, where Dr. Barnes is the CFO he is preparing for a presentation to the Board of HeadCo on the dynamics of budgeting and its relevance to corporate success. Your CFO considers this meeting consequential because the budget for the next corporate period would be considered, and if satisfied the Board will approve the budget. However, there are skeptics on that Board, especially as it relates to the role that accounting numbers play in the budgeting process. Your CFO figured that clarifications on the fundamental budgeting concepts could help to clear the confusion and pave the way for the favorable consideration and approval of the budget by the Board.

As the Director of Managerial Planning and Control for HeadCo budgeting rests squarely on your portfolio. Therefore, your CFO seeks your assistance as he prepares for this extraordinarily important Board meeting. Specifically, he wants you to prepare a brief that will facilitate his presentation. In that brief you are required to answer the following five questions. These are:

1. What are the short-run and long-run budget?

2. What are the pros and cons of line- item budgets?

3. Why do some organizations practice budget lapsing? What are the disadvantages of such a practice?

4. Define static and flexible budgets. Discuss their strengths and weaknesses.

5. Define incremental and zero-based budgeting. Discuss strengths and weaknesses.

Your CFO informed you that he will reward you graciously with 100 points towards your promotion and that those points will be allocated to each of the four areas of expectations above.