Writing Assignment Continuous budgeting
Toll Brothers, Inc., is a large builder of luxury homes across the United States. From 2000 through 2006 it experienced continuous growth in revenues that averaged over 24 percent annually. Not only did it experience growth from year to year, but its revenue grew in each quarter of 2005 and 2006. Then things started to slow down. In 2007 its revenue dropped by 24 percent compared to 2006. Additionally, its revenue declined in two of the four quarters of 2007. Management of the company commented as follows in the company’s 2007 annual report.
Required
Assume you are Toll Brothers’ budget director. Write a memo to the management team explaining how the practice of continuous budgeting could overcome the shortcomings of an annual budget process in an uncertain market situation.