ACCT2320 - CH 10.1 - 10.3

written statement of management's plans for a future time period (usually a year)

Budget: based on a _ level of activity (expected sales revenue or capacity)

Budgetting challenges:

1. _ (including volume of sales and timing of income / expenses)

Budgetting challenges:

2. Manager _ - they may develop easy to achieve budgets if bonus is dependent on it.

3. May constrain and limit innovation / change / response to market developments

Top-down:

• Leadership (directors, executives, etc) set spending limits and revenue targets.

• Managers develop budgets based on current spending and plans

Buttom-up

• Leadership (directors, executives, etc) set spending limits and revenue targets.

• Managers develop budgets based on current spending and plans

Bottom-up

• hard

• easy

Top-down

• hard

• easy

1. Incremental

• Look at ket priorities and allocate resources accordingly

• Take prior yrs budget and add/subtract a % to get this yr's budget

• Identifies costs needed

• Looks at activities consuming resources and uses cost drivers

2. Priority based

• Look at key priorities and allocate resources accordingly

• Take prior yrs budget and add/subtract a % to get this yr's budget

• Identifies costs needed

• Looks at activities consuming resources and uses cost drivers