Tip Top Company recently hired a new hot-shot CEO. Traditionally, the budgeting process at Tip Top has been pretty relaxed, with the executive vice president for sales providing “best-guess” sales projections and the controller providing “ballpark” cost estimates. Although the budget has been due each year 30 days prior to the new fiscal year, it generally is not finalized until two or three months into the new fiscal year. One of the first actions of the new CEO is to institute a formalized authoritative budgeting process, complete with fairly sophisticated sales projections and cost data based on benchmark statistics from industry competitors.
Discuss the issues involved in the new budgeting process for Tip Top Company.