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...

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?