Question
Zangezur Manufacturing has just hired a new controller, Leslie DeMorst. During her first week on the job, Leslie was asked to establish a budget for
Zangezur Manufacturing has just hired a new controller, Leslie DeMorst. During her first week on the job, Leslie was asked to establish a budget for operating expenses in 2019. Since Leslie was not yet familiar with the operations of Zangezur Manufacturing, she decided to budget these expenses using the same procedures as the prior controller. Therefore, in order to establish a budget for operating expenses, Leslie started with actual operating expenses incurred in 2018 and added 3.8%. Leslie based this percentage on inflation as measured by the consumer price index. Required: Comment on the effectiveness of Leslies budgeting strategy.
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