Reference no: EM13483371

The following is a statement by a management consultant:

"Many managers claim that budgets are impractical because companies experience so many uncertainties. However, it is very probable that a firm's competitors face the same uncertainties but are also using budgets extensively as an important management tool. A major objective of budgeting is to implement deliberate, well-conceived business judgment rather than rely on intuition and perhaps accidental success. This objective implies that management is competent and can identify, plan for, manage, and to a large extent control the relevant variables that lead to an organization's success. Whether budgeting is used extensively or not managers must deal with uncertainties. However, budgeting will help organize and quantify these uncertainties and lead managers towards more rational decision making processes. If an organization does not budget well it will lose competitive advantage."

Required:

1. Do you agree with the consultant's comments? Why or why not?

In your response you should incorporate at least three perceived benefits of budgeting. That is, are these perceived benefits sufficient to warrant the cost of implementing an extensive budgeting process?

2. Budgeting usually begins with the sales forecast. Since this is a critical first step in the process, identify at least two factors that should be considered when preparing sales forecasts.