Economics · Budgeting Systems and Control
Merik Co operates in the highly volatile technology sector, where product life cycles are short and consumer preferences shift rapidly. The company currently uses a traditional fixed annual budgeting system. Recently, Merik Co missed a major market opportunity because its rigid budget prevented managers from reallocating funds to a new, emerging technology mid-year. The board is now considering a move to either Rolling Budgets or a Beyond Budgeting approach. Which of the following statements correctly evaluates the most appropriate move for Merik Co to manage its environmental uncertainty?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Rolling budgets are inappropriate for Merik Co because they are more time-consuming than fixed budgets and would further distract management from strategic opportunities.
- 2Traditional fixed budgets are still preferable because they provide a stable benchmark for variance analysis, which is essential for control in volatile environments.
- 3A Beyond Budgeting approach would be most appropriate as it replaces fixed annual targets with relative performance goals, allowing for a more adaptive and faster response to market changes.✓
- 4Rolling budgets would be most appropriate as they ensure a fixed annual target remains in place for performance evaluation while allowing for minor monthly updates.
Correct answer
A Beyond Budgeting approach would be most appropriate as it replaces fixed annual targets with relative performance goals, allowing for a more adaptive and faster response to market changes.
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