Zero-base budgeting , Managerial Accounting

Zero-Base Budgeting

Zero-Base Budgeting (ZBB) was first developed and introduced for business by Peter A. Pyhrr. From this starting ZBB has been explored and adopted by many other businesses. The principle behind ZBB is that each cost centre budget should be made from ‘scratch’ (a zero base). It starts from the basic assumption that the budget for the next year is zero and every process/expenditure must then be justified fully in order to be included in next year’s budget. ZBB is useful for discretionary costs. In ZBB there should be a positive attempt to eliminate inefficiency and slacks from current operations.

The development and implementation of the ZBB model requires managers and others in the organization to engage in several main preparations, analytic and decision-making procedures. These major processes of ZBB include the following:

  • Stating the mission and aims of the organization
  • Recognition of the Organization's Decision Units and Decision Packages
  • Analysis of Each Decision Package
  • Ranking of Decision Packages
  • Acceptance and assigning of Resources
  • Budget Preparation
  • Monitoring and Evaluation

 

Posted Date: 12/7/2012 8:13:44 AM | Location : United States







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