Budgets (4)

Question 1

Advantages of ZBB (inefficiencies)

Answer 1

Possible to identify and remove inefficeint or obsolete operations

Question 2

Advantages of ZBB (close examination)

Answer 2

It necessitates close examination of organisation’s operations

Question 3

Advantages of ZBB (efficient allocation)

Answer 3

Results in a more efficient allocation of resources and challenges the status quo

Question 4

Advantages of ZBB (business environment)

Answer 4

Responds to changes in the business environment

Question 5

Major disadvantage of ZBB?

Answer 5

Volume of extra paperwork created. Costs and benefits in each package must be continually updated and new packages developed as soon as new activities emerge

Question 6

Disadvantage of ZBB (short-term)

Answer 6

Short-term benefits might be emphasised in detriment of long-term benefits

Question 7

Disadvantage of ZBB (all decisions)

Answer 7

Must give the impressino that all decisions have to be made in the budget. Management must not feel restricuted from carrying out new ideas

Question 8

Disadvantage of ZBB (extra training)

Answer 8

Calls for management skills in both constructing decision packages and ranking process that organisation does not possess

Question 9

Disadvantage of ZBB (information systems)

Answer 9

Organisation’s information system may not be capable of providing suitable information

Question 10

Disadvantage of ZBB (ranking)

Answer 10

The ranking process can be difficult

Question 11

Ranking process difficulty (large number)

Answer 11

A large number of packages may have to be ranked

Question 12

Ranking process difficulty (operational reasons)

Answer 12

It can be difficult to rank packages that appear to be equally vital, for legal or operational reasons

Question 13

Ranking process difficulty (qualitative)

Answer 13

Difficult to rank activities that have qualitative rather than quantitiative benefits

Question 14

One way of obtaining benefits of ZBB while overcoming drawbacks?

Answer 14

Apply it selectively on a rolling basis throughout the organisaiton

Question 15

What does ZBB not work well for/

Answer 15

Direct manufacturing costs

Question 16

How are direct manufacturing costs usually budgeted?

Answer 16

Using standard costing

Question 17

How is ZBB best applied

Answer 17

To support expenses, such as expenditure incurred in departments that exist to support the essential production function

Question 18

Characteristics of support expenses?

Answer 18

A large proportion of total expenditure and are less easily quanitifiable by conventional methods and are more discretionary in nature

Question 19

Where can ZBB also successfully be applied to?

Answer 19

Service industries
Local and central government
Educational establishments and hospitals