Different Types of Budgets

question 3

Essay

Different Types of Budgets
The Sticky Company makes a glue that is used to glue the layers of wood veneer together to make plywood.The process for making the glue has been used for many years and the customers are satisfied with the product.The Sticky Company has had very low turnover of personnel and the president and the managers have all been with the company for many years.Although the company appears very stable today,plywood prices are rising and the construction industry is beginning to switch to a cheaper product called chipboard.Chipboard uses a different glue than the glue made by the Sticky Company.
Given the present condition of Sticky Company,should the company use long-term budgets,line-item budgets,budget lapsing,flexible budgets,or zero-based budgeting?

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Definitions:

Direct Costs

Expenses that can be directly linked to the production of specific goods or services.

Indirect Costs

Costs that are not directly attributable to a specific cost object, such as overhead expenses.

Insurance Expired

Represents the portion of an insurance premium that has been used up during a given period, and therefore is no longer in effect.

Factory Equipment

Fixed assets used in the manufacturing process, such as machinery and tools.