Before replacing an obsolete elevator system, which budget would management reference?

• A. Capital
• B. Strategic
• C. Service
• D. Intangible Goods

Answer: (A)

When a facility plans to replace an obsolete elevator, it’s treating the upgrade as a long-term asset investment rather than a routine, ongoing expense. This fits the capital budgeting concept, which is used for major purchases of property, plant, and equipment that provide benefits over several years and require formal approval, depreciation planning, and long-term financial impact analysis.

Other budgets focus on different areas: a strategic budget centers on high-level goals and resource allocation across the organization; a service budget covers ongoing maintenance and service contracts; and an intangible goods budget handles non-physical assets like licenses. For a physical system upgrade with multi-year benefits, the capital budget is the appropriate reference.