Renaldo's Boutiques, Inc., has 14 stores located in a midwestern part of the United States. Renaldo, the president of the company, has set budgets for each store that do not allow for lost, stolen, or misplaced merchandise (inventory shrinkage). Research shows the disappearance of store merchandise is attributed to a combination of internal and external causes:
Customer theft-35 percent
Employee theft-40 percent
Administrative errors-18 percent
Vendor dishonesty-7 percent
This chapter discussed two types of budgeting philosophies. Which philosophy do you believe Renaldo is following? Use information in this problem to support your answer.