Which budget type is expected to cover items that will last for three or more years?

The capital budget is specifically designed to allocate funds for significant investments that have a long-term impact, typically covering items or projects expected to last for three years or more. This includes expenditures on assets such as buildings, equipment, and major renovations. A capital budget is crucial for planning future growth and ensuring that sufficient resources are available for these major expenses.

A variable budget, in contrast, adapts based on actual levels of activity or usage, and is not focused on long-term assets. The gross budget refers to the total budgeted expenses without any adjustments or subtractions and does not inherently relate to long-term planning. An operational budget primarily addresses the day-to-day expenses necessary for running an organization and usually focuses on short-term needs rather than long-term investments.

Thus, the capital budget is the appropriate choice for managing and planning for costs associated with long-lasting assets and investments, making it essential for aligning financial resources with long-term strategic objectives.