If anyone could explain in simple language with few examples? Question 2 (word l
ID: 2328417 • Letter: I
Question
If anyone could explain in simple language with few examples?
Question 2 (word limit: 500 words) Jack Stratton has seen the Pillar Group, a not-for-profit organization, grow during the past ten years to a S750 million revenue, nation-wide organization. Jack was promoted to his controller position six months ago, after serving capably in several financial accounting positions at the Pillar Group. At a Budget Review Committee meeting last Monday, several committee members expressed frustration with the pace of the budget development. They described the newly introduced bottom up system of participative budgeting as costly, repetitive, and unwieldy. Jack's objective in introducing level supervisors and employees. the participative approach was to involve to a much greater extent lower Required: (a Describe participative budgeting (2 marks) (b) Identify six benefits of participative budgeting to Pillar Group (3 marks)Explanation / Answer
Participative Budgeting:
It refers to the format of budgeting where bottom up approach is followed instead of top down approach for the budget formation. In the conventional form of budgeting management of the enterprise will make the budgets on the basis of their own assumption and presumption but in the participative budgeting those people who will be directly impacted by the decision are involved in the whole process . It involves the key employees of the organisation in the budgeting process.
For example, in case of traditional budgeting approach a management can decide that productivity will increase due to the learning rate effect of the labour, so they assume that the production units will be increased at the same(old) cost. However, in reality it may be possible that learning rate may be lesser from the rate expected by the managers due to the learning capability of the labours or change of method or may be due to any other reason. So no of units budgeted by the top management will be imposed on the production department and they have to suffer.
But, when participative budgeting is followed input will be taken from the subordinates and accordingly number of units will be decided.
Like any other method or technology participative budgeting has its advantage and disadvantage.
Following are the advantages of participative budgeting: