IMANET Exam CMA Topic 6 Question 32 Discussion

Capital budgeting is the process of planning expenditures for investments on which the returns are expected to occur over a period of more than 1 year. Thus, capital budgeting concerns the acquisition or disposal of long-term assets and the financing ramifications of such decisions. The adoption of a new method of allocating, nontraceable costs to product lines has no effect on a company's cash cows, does not concern the acquisition of long- term asset and is not concerned with financing Hence, capital budgeting is irrelevant to such a decision.