Budgetary Planning and Control: Zero-Based, Activity-Based and Incremental Budgeting

Budgetary Planning and
Control

Contents
INTRODUCTION...........................................................................................................................................3
QUESTION 1.................................................................................................................................................3
How Zero-based budgeting techniques differ from the traditional budgeting?......................................3
How Zero-Based budgeting may assist in planning and controlling discretionary costs?........................4
How Zero-based will help to control any inefficiencies?.........................................................................4
QUESTION 2.................................................................................................................................................5
Suggest reasons why managers may be reluctant to participate fully in setting budgets and suggest
also unwanted side effects which may arise from the imposition of budgets by senior management.. .5
QUESTION 3.................................................................................................................................................6
Discuss advantages and disadvantages of adopting activity-based budgets to fixed budget in
manufacturing company..........................................................................................................................6
Explain the need for the measurement or company and department performance giving examples of
the range of financial & non-financial factors which impact the performance and providing solutions
to the factors mentioned.........................................................................................................................7
QUESTION 4.................................................................................................................................................8
Prepare incremental budget....................................................................................................................8
Can incremental budget be used for rent (of premises) and what about advertising expenses?............9
Explain the top down and bottom up approach and explain the advantage and disadvantage of each
approach.................................................................................................................................................9
QUESTION 5...............................................................................................................................................10
Prepare rolling budget...........................................................................................................................10
Examples on difficulties a company must face when changing budgetary systems..............................11
REFERENCES..............................................................................................................................................12

INTRODUCTION
The method of constructing a budget and then using it to manage a daily finances is known
as budget preparation. The goal of budgeting is to reduce the chance that a company's monetary
performance will be less than ideal. Constructing a budget will be the first process in terms of
financing. Budgeting is the process of converting lengthy business vision into brief new
initiatives. A budget is a document that outlines a company's short-term goals and how
stimulates business to obtain, utilize, and regulate funds to satisfy those goals. A company's
spending plan should be thorough and well-planned. The budget is an important component of
planning and scheduling, as well as a key tool for performance evaluations (Velte, 2019). The
budget is a plan used to evaluate revenue and spending over a length of time, generally the
preceding quarter, and to make adjustments to account for any predictable changes. A budget, in
the broadest sense, is an estimate of revenue and spending for a certain predefined timeframe. In
this report consist of different types of budget questions that based on the rolling, zero based and
activity based budgets.
QUESTION 1
How Zero-based budgeting techniques differ from the traditional budgeting?
As the name implies, zero-based planning is a spending approach that involves the
development and justification of every budget from the ground up. Every time the budget is
prepared, it is a technique where all of the operations are reviewed. It is constructed with no
reference to the previous expenditures or real events. Simply said, it's a planning approach in
which each expense element requires particular explanation, like the budget's actions were being
performed in for the first moment. As a result, the management has the weight of proof in
explaining why money is being spent on a specific activity but also what would happen if the
suggested activity is not carried out and no money is being spent. The budget allotment is zero if
permission is not granted.
 Traditional budgeting is a method of budget planning wherein the prior year's
expenditure is used as a starting point. Zero-based planning, on either extreme, is a