The management can decide whether the decision package is to be approved or not.Ĥ. The management can evaluate such a decision package and rank it against other activities of an organization.ģ. Each separate activity of an organization is identified and designated as a decision package.Ģ. ![]() The following steps are involved in the preparation of ZBBġ. These things are overcome in the zero lose budgeting. If the previous year’s budget has any draw back or error that has not been find out by any body so far, it is very difficult to prepare an accurate budget for in the years to come. Moreover, the likely changes of current year are also considered over and above the past experience while preparing a budget. This type of approach is followed by many business concerns. Accuracy in Zero based budgetingĪ budget is prepared by taking previous year budget as base. The reason is that ZBB develops and use standard cost for such activities. At the same time, by appointing an ordinary educated person in legal matters, an organization can get success through zero based budgeting. Generally, high level of educated persons in legal matters must be appointed as legal staff. Even though, a direct relationship can be created with the help of ZBB viz., the output of legal staff and office personnel. In other words, the input has no relationship with output. But there are some activities that have no direct relationship with other activities. ![]() For example, quality raw materials are supplied to production department certainly the output of such production department has quality. A budget can be effectively used as a managerial control if input of an activity has a direct relation with the output of these activities. ![]() But, Ex-President Jimmy Carter of the United States of America, then Governor of the States of Georgia, introduce ZBB as a means of controlling state expenditure.Ī budget is nothing but the expression of objectives of an organization in numerical terms. Even though, no businessman can introduce ZBB in their business concern. The reason is that zero based budgets are integrating the managerial functions of planning and control. Most of the businessmen were accepted that the zero based budget can be used as a managerial tool. The approach requires that all activities be analyzed in decision packages which are evaluated by systematic analysis and ranked in order of importance”. “Zero based budgeting is a planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch (hence zero base) and shifts the burden of proof to each manager to justify why he should spend any money at all.
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