Question

The Sticky Company makes a glue that is used to glue the layers of wood veneer together to make plywood. The process for making the glue has been used for many years and the customers are satisfied with the product. The Sticky Company has had very low turnover of personnel and the president and the managers have all been with the company for many years. Although the company appears very stable today, plywood prices are rising and the construction industry is beginning to switch to a cheaper product called chipboard. Chipboard uses a different glue than the glue made by the Sticky Company.

Required:

Given the present condition of Sticky Company, should the company use long-term budgets, line-item budgets, budget lapsing, flexible budgets, or zero-based budgeting?  

Answer 1

They should use the Zero based budget.
this is due to the fact that "the chip board making is new the company ,there is no historical data of them till now
So thanks to market conditions, as from this year , the company will use  the chipboard.
Therefore, the zero budget will be hrlpful to only estimate the budget of the company.
Note: Budgets are often supported past data, but zero-based budget would start with some expectations, then budgeted, and don't take any past data under consideration .
so we can say that Zero budget will be the best option to go with than
1.long term budget
2.Flexible budget
3.budget lapsing
4.line item budget.