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Question 1

Problems involved with Fixed Budgeting

Answer 1

1. Managers may try to ‘cut corners’ which may affect quality.
2. Budgets can become very inflexible.
3. Budgeting is based on assumptions which can be subject to error.

Question 2

Advantages of fixed budgeting

Answer 2

1. Cost Control
2. Better understanding of organisation after review (can highlight underperforming areas)
3. Ensures resources are used efficiently

Question 3

What is a Top down relationship (budgeting)

Answer 3

owners/directors of an organisation decide on the individual plans for each department and these plans are given to the managers to implement

Question 4

What is a Bottom up relationship (budgeting)

Answer 4

Managers draw up their own budgets, and these are given to the owners or directors who co-ordinate the individual budgets Into a master budget