The Sticky Company Makes a Glue That Is Used to Glue

question 18

Essay

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.
Required:
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:

Economic Profits

Profits calculated by subtracting both explicit (direct payments) and implicit (opportunity) costs from total revenues.

Market Price

The ongoing selling or buying rate for an asset or service in a certain market.

Satisfier Factors

Elements related to the nature of the job itself, such as achievement, recognition, and work itself, that lead to job satisfaction.

Two-Factor Theory

A psychological theory proposed by Frederick Herzberg that suggests job satisfaction and dissatisfaction arise from two different sets of factors: motivators and hygiene factors.