I will be doing this assignment with the following assumption. * That the company does not have accurate budget
* That Rada plc have different departments of their business in different area of the world. For an organisation not to have an accurate budgeting is like working without any plan because budget take an important role in the day to day running of a business and also most importantly the future. Budget is important for the following reason * Planning of annual operation
* Coordinating the activities of various part of organisation and ensuring that the parts are in harmony with other * Communicating plan to the various responsibility centre manager * Motivating managers to strive to achieve the organisation goals * Controlling activities
* Evaluating the performance of a manager.
There are different types of budget and the include
1. Rolling budget
2. Incremental budget
3. Zero Based Budget
4. Activity Based Budget.
* Rolling budget
According to black hall publishing website rolling budget is a twelve month budget that is prepared many times in a year. The main reason of a rolling budget is to allow the management opportunity to forecast accurately and also to be able to revise its plan and also to plan for the next few months. The balance for using extra administrative cost and effort to produce several budget instead of one will come from making more accurate and forecasting and planning. ( Blackhallpublishing .com, October 2010). These are the advantages and disadvantages given by the black hall publishing ADVANTAGES
* As a result of being assessed regularly thus make it more accurate and realistic. * Because the budget is revised regularly and as a result reduced uncertainty. * Any planning and control done will be base on updated plan because of its regular revision. * It will always extend a number of months ahead because of it is continuous.
* Because it involve producing several budget in a year it makes it time consuming and expensive. * The manager can be off-put with the volume of work needed for the each reassessment. * If the standard or stock valuation is require to be revise in each budget revision this might be time consuming.
According to tutor 2 u website this is the budget prepared using a previous period budget or activity performance as a basis with incremental amount added for the new budget period, the allocation of resources is based upon allocation from previous period. It says this approach is not recommended as it fail to into account changing circumstances moreover it encourages spending up to the budget to ensure reasonable allocation in the next period and this lead to spend it or lose it mentality. According to tutor2u.com (october2010) incremental budgeting have the following advantages and disadvantages ADVANTAGES
* The changes to this type of budget are gradual as a result makes it stable. * There is consistency in the way the manager operates their departments. * It is easy to understand and relatively simple to operate. * It is easier to achieve coordination between budgets.
* The effect of change can be seen gradually.
* There are no rewards or incentive for new idea development. * There are no incentives for cost reduction.
* Encourages spending up to the budget so that the budget is maintain next year. * Since the budgets were set originally the priority may have change. * It put assumption that the method of working and activities will continue the same way and this might wrong.
ZERO BASED BUDGETS (ZBB)
According to Collin Drury (2009) it is the type of budget that include the following * Start from zero
* The activities are justified and prioritized.
* Each budget is being completed as if the programmes are being launched for the first time. * Funds allocated on the...