Cindy Wilkins, CEO of River Beverages, looks to the future and comments, “Planning is an important aspect of budget preparation for every level of our organization. I would like to decrease the time spent on preparing the budget, but I believe that it keeps people thinking about the future. The negative aspect of the budgeting process is that sometimes it overcontrols our managers. We need to stay nimble enough to react to customer demands while staying structured enough to achieve corporate objectives. For the most part, our budget process keeps our managers aware of sales goals and alerts them when sales or expenses are off track.”

Required

a. Discuss each step in River Beverages’ budgeting process. Begin with the division manager’s initial reports and end with the board of directors’ approval. Is each step necessary? Explain.

b. Evaluate River Beverages’ responsibility-accounting system. Specifically, should the plant managers be held responsible for costs or profits? Why?

c. Write a report to River Beverages’ management stating the advantages and disadvantages of the company’s budgeting process. Start your report by stating your assumption(s) about what River Beverages’ management wants the budgeting process to accomplish.

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