Europe region budget is PC($) 45,000; the region maintains “control” over PC($)
10,000 which, during the budget year, may be transferred to one or more of the affil-
iates, reducing the region control budget by the amounts so transferred and increas-
ing the affected affiliates’ budgets accordingly. If we assume that PC($) 4,000 was
transferred to Affiliate E and PC($) 6,000 to Affiliate F during 20X0, the final budget
allocation is shown on Exhibit 25.5 in both PC($) and the LCs of the affected coun-
tries, using the same exchange rates as were used in the original capital budget.
25.6 CONTROLLING THE CAPITAL BUDGET
(a) Budget Controls. In controlling capital budgets, it is customary to examine three
aspects of the budget periodically, say quarterly: the capital budget itself, appropria-
tions against the capital budget (how much of the budget was authorized for actual
implementation), and capital budget expenditures. We have illustrated a control as-
pect of the capital budget itself in our discussion of the region control procedure
shown on Exhibits 25.4 and 25.5; otherwise, increases or decreases in the capital
budget are usually a matter determined by the corporate level. Controls of capital ex-
25 • 8 MULTINATIONAL BUDGETING AND CONTROL SYSTEMSEUROPE REGION
Capital Budget
20X0
PC ($) LCAffiliate C (United Kingdom) 10,000 6,000
Affiliate D (France) 8,000 45,000
Affiliate E (Germany) 12,000 20,000
Affiliate F (Italy) __5,000 6,000,000
Affiliates total 35,000
Region control 10,000__
Region total 45,000____
Exhibit 25.4. Capital Budget.
EUROPE REGION
Capital Budget—Revised
20X0
PC ($) LCAffiliate C (United Kingdom) 10,000 6,000
Affiliate D (France) 8,000 45,000
Affiliate E (Germany) 16,000 27,000
Affiliate F (Italy) 11,000__ 13,200,000
Total 45,000____
Exhibit 25.5. Capital Budget—Revised.