HTM chapter 9 ZBB

base budget

defined as the expenditure level necessary to maintain last year's service level at next year's prices

allocation of resources

the ranking list results in a priority order for the what in ZBB

fixed costs

these costs do not vary with volume

reduced-level budget

this defines a percentage that the budget must be reduced

program planning budgeting system

this is an approach to developing a program budget

budget time horizon

this is the immediate future, which can be predicted with a reasonable degree of certainty on the basis of past business decisions and commitments (12 months)

business planning horizon

this is the period over which forecasts can be made with a reasonable degree of confidence (3 to 5 years)

strategic planning horizon

this is the period that extends far into the future and it focuses on the long-term aspirations of the sport organization and management

A budget

this quantifies planned revenues and expenses for a period of time

Capital expenditure budgets

a forecast of the expenses and income related to a capital investment

either no control or only very limited control

a forecast relates to events in the environment, relevant to the implementation of the plan, over which the business has what?

based on projected changes in operations and conditions

an incremental budget is based on what?

decision unit

an individual or unit where budget decisions are made; responsible for creating decision packages in zero-based budgeting

decision packages

are discrete additions to the reduced-level budget, ranked in priority order, to maintain existing programs, serve increased workloads, or add new programs

variable costs

costs that changes with volume

yes

is their staff involvement in incremental budgeting?

no

is top down fashion accurate or effective

its is a transitional type of budget between the line-item budget and the performance budget

program budgeting is what type of budget between what two things?

output budgeting

program planning budgeting systems is associated with what?

planned changes to assets, liabilities, and cash flows

Budgets can also include planned what?

higher then zero

MZBB starts at a base that is where?

forecasting process

Planning helps to provide information about the environment and what other process?

agree to the priority and ranking of their departments and activities.

ZBB requires all mangers involved in the budget process to what?

"zero base"

ZBB requires building a budget from a what?

it must be sustainable

a budget must be what?

budget

a financial plan that sets out a business's financial targets, expressed in monetary terms

line-item budgeting

a technique in which line items (also known as objects of expenditure) are the main focus of analysis, authorization, and control.

program budget

budget where expenditures are based primarily on programs of work and secondarily on the character and object of work

modified zero-based budgeting

budgeting concept that starts at a base higher then zero and matches spending levels with service to be performed

output budgeting

budgeting in which specific goals and objectives form the framework for a strategic process

its scarce resources purposefully

by connecting the budget to a plan it enables an organization to allocate what?

mixed costs

contain both fixed and variable costs

periodic expense

expenses for which money is set aside each month in order to have enough money when the expense occurs

step costs

expenses that are constant within a range of use but differ between ranges of use

expense budget

for each unit lists its primary activities and allocates a dollar amount to each

cash budget

forecasts how much cash the organization will have on hand and how much it will need to meet expenses

one time events

forecasts may also predict what? (e.g. outcome of free agency or the performance of a new recruit)

no

if a budget is not connected to a plan, is it a true budget?

the most important ones

in ZBB what items are funded first ?

ranked

in an organization each department and its related activities are what?

no

in incremental budgeting does anything ever get cut?

past sales histories and various factors that influence sales

in order to estimate sales a prudent manager will look at what?

top down management style

incremental budgeting is usually associated with what kind of management style?

they spend up to the budget because they do not want a surplus and lose budgeting room for next fiscal year

incremental budgeting make managers do what because they are afraid of what occruing?

budget time horizon, business planning horizon, strategic planning horizon.

individuals involve in budgeting should consider what three distinct time periods?

Zero-based budgeting (ZBB)

is a budgeting approach and a financial management strategy intended to help decision makers achieve more cost-effective delivery of goods and services

revenues budgets

is a forecast of revenues based on projections of the organization's sales

incremental budget

is a form of line-item budgeting in which next year's budget is arrived at by either decreasing or increasing last year's budget for each line item by the same percentage

forecast

is a prediction of future events and their quantification for the purpose of budgeting

Planning

is the establishment of objectives and the formulation, evaluation, and selection of the policies, strategies, tactics, and actions required to achieve those objectives

management planning and PPBS

the development of goals and objectives for an organization or program is fundamental to what?

external, internal, or personal

the environment considered in forecasting may be what?

with approaches to determining what the future holds and with the proper presentation and use of forecasts

the field of forecasting is concerned with what?

gaining buy-in from the administration and department heads

the first step toward sustainability is gaining what from who?

changing circumstances

the incremental budget approach is not recommended because it fails to take what into account?

increases paperowkr and requires time to prepare, managers tend to inflate the benefits of activities they want funded, and the eventual outcome may not differ much from what would occur with an in incremental budget

what are disadvantages of ZBB?

provides significant accountability to the administrators, coaches, and staff who created the criteria conflicts should be lessened

what are the advantages of ZBB?

use cost identification and behavior techniques(enhances the budgeting approach) begins with a floor of expenses includes decision or add packages requires managers to reduce their budgets by a predetermined percentage puts existing programs in competition with new ones

what are the chracteristics of MZBB?

1. each budget period starts fresh 2. budgets are zero unless managers make the case for resources. The relevant manager must justify the whole of the budget allocation 3. every activity is questioned as if it were new, before any resources are allocated to it 4. each plan of action hast to be justified in terms of total expected cost and benefit, with no reference to past activities

what are the four requirements of ZBB

1. Forecasting relies on past relationships and making predictions from historical information 2. Consider developing several forecasts under different potential scenarios with a probability assigned to each one 3. longer planning periods tend to produce less accurate forecasts. Use shorter planning periods 4. Forecasts of large interrelated items are more accurate than forecasts of specific itemized amount

what are the guidelines for forecasting (4 parts) ?

1. Identify expenses 2. Allocate fixed and mixed expenses 3. circle back to identify any fixed expenses that occur 4. average the mixed expenses to determine the average 6 to 9 months 5 address and prioritize the variable expense 6. expense must be offset against anticipated revenues

what are the steps in MZBB

funds are allocated to departments or organizational units, and the managers of these units then allocate these funds to activities they see fit. only the incremental change in the budget requested is reviewed

what are the two important characteristics of incremental budgeting?

1. input from the entire organization 2. a means of sharing the budget across the organization

what are the two successful keys to budgeting?

supplies, personnel, travel, and operational expenditures

what are typical line items?

1. link budgeting to strategic planning 2. make budgeting procedures part of strategic planning 3. during the budgeting process, spend less time collecting and gathering data and more time generation information for strategic decision making 4. get agreement on summary budgets before you spend time preparing detail budgets 5. automate the collection and consolidation of budgets across the organization 6. set up budget so it will accept changes quickly and easily 7. design a budget that give lower-level managers some form of fiscal control over their own areas of responsibility 8. leverage financial systems by establishing a data warehouse that can be used for both reporting and budgeting

what best practices can transform budgeting into a value-added activity?

input only from the head office or higher administration

what does it mean if a budget is in a top-down fashion

a forecast simply is a prediction, and a plan defines what we are going to do.

what is the difference between a forecast and a plan

forecasting is concerned with what the future will look like, and budgeting is concerned with what it should like.

what is the difference between forecasting and budgeting?

planning

what is the essence of program budgeting?

to link planning with budgeting systematically in the service of clearly identified goals

what is the goal program planning budgeting system?

to highlight the units of activity that line items support

what is the purpose of program budgeting?

Planning

what is usually the first step, prior to forecasting and budgeting

service

what kind of companies use modified zero-based budgeting?

1. define financial objectives, which determine the direction and thrust of each department's operations 2. establish goals for achieving these objectives within the budgeted timeframe 3. identify the activities and quantify the elements needed to achieve established goals 4. describe the factors and situations that may affect planned activities

what should the budget formulation process do?

because no one sport program or department is increased or cut at a different level than the others

why does incremental budgeting often have the name of the fair share approach?

prioritization

zero based budgeting forces what?