1.3 Incremental budgets An incremental budget starts with the previous period’s budget or actual results and adds (or subtracts) an incremental amount to cover inflation and other known changes.
It is suitable for stable businesses, where costs are not expected to change significantly. There should be good cost control and limited discretionary costs.
Advantages:
§ quickest and easiest methodwｗw.ExamＷ.CoM
§ assuming that the historic figures are acceptable, only the increment needs to be justified
§ avoids ‘reinventing the wheel’.
Disadvantages:
§ Builds in previous problems and inefficiencies, e.g. an overspend may result in a larger budget allowance next year.
§ Uneconomic activities may be continued, e.g. the firm may continue to make a component in-house when it might be cheaper to outsource.
§ Managers may spend unnecessarily to use up their budgeted expenditure allowance this year, thus ensuring they get the same (or a larger) budget next year. |
发表于 2012-2-23 17:09:42
