Answer (C) is correct . A budget is a realistic plan for the future expressed in quantitative terms. The process of budgeting forces a company to establish goals, determine the resources necessary to achieve those goals, and anticipate future difficulties in their achievement. A budget is also a control tool because it establishes standards and facilitates comparison of actual and budgeted performance. Because a budget establishes standards and accountability, it motivates good performance by highlighting the work of effective managers. Moreover, the nature of the budgeting process fosters communication of goals to company subunits and coordination of their efforts. Budgeting activities by entities within the company must be coordinated because they are interdependent. Thus, the sales budget is a necessary input to the formulation of the production budget. In turn, production requirements must be known before purchases and expense budgets can be developed, and all other budgets must be completed before preparation of the cash budget.
Answer (A) is incorrect because Responsibility centers are determined prior to budgeting.
Answer (B) is incorrect because Responsibility centers are determined prior to budgeting, budgets do not fix blame but rather measure performance, and goal congruence is promoted but not ensured by budgets.
Answer (D) is incorrect because Budgets do not fix blame but rather measure performance, and goal congruence is promoted but not ensured by budgets.
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