Explain one purpose of a budget for ABC's e-waste factory.

• A. A budget helps set spending targets and control costs in the new operation
• B. A budget is used to forecast demand for products
• C. A budget guarantees maximum profits regardless of costs
• D. A budget helps ABC set spending targets but does not affect costs

Answer: (D)

Budgets are planning and control tools that set spending limits and provide a way to monitor performance. For ABC’s e-waste factory, the main purpose is to establish spending targets for different areas—equipment, labor, materials—and then track actual costs against those targets. This helps ensure resources are used efficiently, highlights variances so managers can take corrective action, and keeps the project moving in line with financial plans as production grows.

While budgets can include revenue or demand assumptions, their primary function is to guide financial resources and manage costs, not to guarantee profits. It’s also not true that budgets don’t affect costs—setting spending limits and comparing actuals to planned figures directly influences cost control and decision-making.