Bisport Inc. is a rapidly expanding company in BC. It manufactures the skateboards that have been modified for use on ski slopes during the off-season. This years sales are considerably higher than last years sales, and sales are expected to double next year. The unexpected growth in sales has presented numerous challenges to the companys management team, and the stress is really starting to show. The companys president believes that the management time required to prepare a cash budget should be devoted to other, more pressing matters.

Required:

i) Explain to the president why cash budgeting is particularly important to a rapidly expanding company such as Bisport Inc.

ii) When preparing the budgets, the use of budgetary slack is common in the company. For example, the production manager makes adjustments to expenses by adding at least 10% to the estimates. Discuss why the use of budgetary slack may be unethical.