De Anza Manufacturing has just hired a new controller, Diana Deanza. During her first week on the...

Question

De Anza Manufacturing has just hired a new controller, Diana Deanza. During her first week on the job, Diana was asked to establish a budget for operating
 expenses in 2011.
 
 Since Diana was not yet familiar with the operations of De Anza 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, Diana started with actual operating expenses incurred in 2010 and added 4.3 percent. Diana
 based this percentage on inflation as measured by the consumer price index.
 
 Comment on the effectiveness of Diana%u2019s budgeting strategy.

p.s.

as we study a"budgeting chapter", what budget is to come to your mind as the "starting point" in
 preparing the master budget? What may result if this budget is inaccurate?

Robert · Accepted Answer

De Anza Manufacturing has just hired a new controller, Diana Deanza. During 
her first week on the job, Diana was asked to establish a budget for operating 
expenses in 2011. Since Diana was not yet familiar with the operations of De 
Anza 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, Diana started with actual operating expenses incurred in 
2010 and added 4.3 percent. Diana based this percentage on inflation as 
measured by the consumer price index. Comment on the effectiveness of 
Diana%u2019s budgeting strategy. 
P.

De Anza Manufacturing has just hired a new controller, Diana Deanza. During her first week on the job, Diana was asked to establish a budget for operating expenses in 2011. Since Diana was not yet...

p.s.

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