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Long-term, Line-item, lapsing, felixible and zero-based budgeting advantages

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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. 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?

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The turnover of personnel here refers to the total number of employees divided by the number of employees replaced during a certain period. Since the turnover rate is low for the personnel, this means that there are not many replacements thus using a line item budgeting is unnecessary. We don't use long term budgets either because we are not preparing a budget ...

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Umut Oltulu, MBA
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  • MBA, Texas A&M University-Kingsville
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