Critical Evaluation

Question 1

what are the problems with traditional budgeting?

Answer 1

• discourages innovation
• reduces flexibility
• potential to miss opportunities

Question 2

Describe a rolling budget

Answer 2

12 month budget
adding a new month every time
managers constantly focused on future
continual adjustment
greater flexibility
tighter control through updating revision

Question 3

Describe activity based budgets

Answer 3

focuses on activites rather than departments
emphasises adding value
activities can be linked to goals
popular in service based industries - police

Question 4

Describe zero based budgets

Answer 4

new budget with no reference to past
avoids pitfalls of incremental budgets
encourage improvements and changes to activity

Question 5

criticisms of budgeting

Answer 5

• meeting low targets
• resource use unnecessarily
• managers encouraged to make bonuses
• competitions between departments
• inaccurate forecasts
• meeting not beating
• avoiding risks
• rigid time scale

Question 6

what is bounded rationality

Answer 6

people unable to process all available data sp focus on similar stimuli hence people stick with trusted strategies. Tendency to satisfy not optimise