Budgeting

Question 1

Benefits of budgeting

Answer 1

. Target setting
. Improved planning
. Control
. Monitoring and calculation of variances
. Communication
. Coordination between departments and employees
. Improved decision making

Question 2

Drawbacks of budgeting

Answer 2

. The figures may be inaccurate, especially sales
. Budgets can be restrictive and prevent improved business performance
. Budgets can demotivate staff
. Budgets can be time consuming to prepare and monitor
. They can increase costs in the short term

Question 3

Advantages of zero based budgeting

Answer 3

. Eliminates wasteful spending
. Increased employee involvement
. Efficient resource allocation

Question 4

Disadvantages of zero based budgeting

Answer 4

. Time consuming process
. Increased workload
. Implementation costs
. Employee morale

Question 5

Advantages of incremental budgeting

Answer 5

. Simple and efficient
. Cost-effective
. Consistent and fair

Question 6

Disadvantages of incremental budgeting

Answer 6

. Overlooks potential savings
. Limited future focus
. Discourages cost reduction
. Potential for budget padding
. Unchallenging targets