Budgeting Methods
Incremental, Zero-Based & Flexible Budgeting
🎯 The Strategic Brief
You are the Finance Director of GlobalTech Industries, a mid-sized technology company with £5 million in annual revenue. The Board has asked you to overhaul the budgeting system. Different departments are lobbying for different approaches. Your task: understand each method's strategic implications and choose wisely.
📚 Syllabus Learning Objectives (5.5.1)
Incremental Budgeting
Last year's budget + inflation adjustment. Quick but potentially wasteful.
Zero-Based Budgeting
Start from £0. Every pound must be justified from scratch.
Flexible Budgeting
Adjusts targets based on actual activity levels. Fairer comparisons.
💡 Key Insight: Purpose of Budgets
Compare actual vs planned performance
Distribute limited resources strategically
Set limits to prevent overspending
Give staff targets to work towards
🎓 Key Examiner Tips
For "Analyse" Questions:
Build chains: Method → Behaviour → Financial Impact
For "Evaluate" Questions:
Use AJIM: State recommendation, justify, give "it depends" factors
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