Select appropriate budgeting methods for Excellent Year Ltd and its needs/ Budgeting Systems Types of Budgeting Systems Zero-based budgeting: This method is done by estimating production, sales, and other operating data as if it was operating the first time. Having a refreshed view of operations is the main benefit of this budgeting method. A more commonly used method is beginning with the budget of last year, and calculated it for real results and the following year’s expected changes. Excellent Year Ltd should use this type of budgeting if its costs are spiraling upwards and if it has the time to do zero based budgeting. Advantages of Zero based budgeting are that it motivates staff because it gives them more power in decision making, motivated …show more content…
Similar activity levels must be first identified in the construction process. It is suitable for Excellent Year Limited if it has varying demands for its products Advantages of Flexible budgeting are that it offers more control and evaluation during the budget period, being able to Measuring price, wage, and production overhead with variance analysis, products is constant, controlling costs is possible because actual performance from planned is shown, it also adapts to changes easily. Disadvantages include that acquisition of accurate information is difficult, complex because it require fixed, variable, and semi variable categorization, making continuous adjustments is not always beneficial. Fixed or Static Budget: This type of budget is more concrete, it shows only one level of activity, changes in activity do not affect the budget once it has been determined. This type of budgeting is frequently used by companies in the service industry for management functions like accounting, purchasing, and engineering. The downside of the fixed budget method is activity levels are not allowed to fluctuate. It is suitable for Excellent Year Ltd if the demand for its products is