Budgeting - A critical examination

Question 1

3 alternative budgets to incremental budgeting

Answer 1

1. Rolling budget
2. Activity based budgeting
3. Zero based budgeting

Question 2

Rolling budget

Answer 2

• At end of each control period, compare actual results and budget forecast., to review/revise budgets for remaining control periods.
• Encourages review and improvement, planning/control based on more accurate budgets.
• BUT, time-consuming, demotivating if targets change too much.

Question 3

Activity-based Budgeting

Answer 3

• Used with ABC
• Focuses on activities, not physical departments/products, as they drive costs.
  Popular in public sector organisations

Question 4

Zero Based Budgeting

Answer 4

• Starts budget afresh, with every activity questioned and justified.
• Encourages forward thinking to identify resources needed.
• Result in cost structure changes, increase efficiency.

Question 5

Beyond Budgeting

Answer 5

• Organisations break out of annual performance trap.
• Motivation through challenges and delegating responsibility to operational managers
• Greater inclusion/teamwork, less bureaucracy.