A. What are the advantages and disadvantages of conventional budgeting versus ze
ID: 2453301 • Letter: A
Question
A. What are the advantages and disadvantages of conventional budgeting versus zero-based budgeting?B. what organizational characteristics create likely candidates for zero-based budgeting?
A. What are the advantages and disadvantages of conventional budgeting versus zero-based budgeting?
B. what organizational characteristics create likely candidates for zero-based budgeting?
A. What are the advantages and disadvantages of conventional budgeting versus zero-based budgeting?
B. what organizational characteristics create likely candidates for zero-based budgeting?
Explanation / Answer
A. Conventional Budgeting is the simplest form of budgeting, in that volume and numerical information is available in respect of previous years in order to analyse trends. The main advantage of having a conventional budgeting system is that we have comparative numbers, which are based on accurate or near-to-accurate mathematical calculations. However, in case there are unforeseen circumstances which can alter the actual numbers for the year, the budget values can be affected drastically.
As against this, a zero-based budgeting system is where there are no trends. For a newly established business, zero-based budgeting is the start of the process. Without any backups of numbers, trends for the year and forthcoming years are established, based on the perceptions of the management. This can prove useful in the short run. However, using zero-based budgeting for long term understanding purposes can prove harmful, since then the management can provide numbers which have no base with actual results. In such cases, the budgeting exercise is not considered to be of any use.
B. The organisational charateristics which create candidates for zero-based budgeting are :
No prior budgeting exercise being conducted by the management
No previous data available, if the Company is in the first year of operations
Perceptions of the Management, considering the line of business of the Company, and existing market trends thereagainst
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.