Budgets enable planning and performance control

Steps:

• Identify common purposes of business budgets: setting targets, coordinating activities, and monitoring performance.
• Evaluate each option against standard budgeting goals from accounting principles.
• Match choices to valid reasons: planning (1) and control (3) are core, while coordination (2) is secondary.
• Select the option covering the primary purposes without extras.

Why A is correct:

• Budgets primarily set performance targets (1) and enable cost monitoring/control (3), aligning with managerial accounting definitions for resource allocation and variance analysis.

Why the others are wrong:

• B omits control (3), ignoring budgets' role in performance evaluation.
• C includes coordination (2) but excludes target-setting (1), missing a foundational purpose.
• D covers only coordination (2), neglecting planning and control essentials.

Final answer: A