In many organizations, the operating budget is the primary control tool. The use of a budget to control activities is more appropriate in some circumstances than in others, and always a key criterion in evaluating the efficacy of a control is whether that control is helping to implement the firm's strategy.
Consider the following activities and circumstances, and discuss whether use of a budget as a primary control is appropriate:
a. Research and development department of a mature manufacturing firm
b. Marketing expense of a start-up technology company
c. Travel expense for the sales force of an insurance company
d. Energy costs for a public utility company
e. Costs of environmental remediation for a chemical manufacturer
f. Production costs in a car manufacturing company
g. Operational costs of classroom buildings in a public university