CIMA Operational P1 Exam Dumps

An incremental; approach is not as easy and fast to implement than other forms of budgeting approaches e.g. zero based budgeting.

Public sector organizations tend to be fairly complex and in many cases outputs cannot be measured in monetary terms therefore the link between inputs and outputs is difficult to establish. An incremental approach can therefore provide a cost effective approach to budgeting.

Under an incremental approach to budgeting, existing operations and the current budgeted allowance for these existing activities are taken as the base level for preparing the budget.

The main advantage of incremental budgeting is that the cost of past activities becomes fixed and any inefficiencies or wastage is perpetuated.

The incremental approach means that budget holders in public sector organizations will be encouraged to use up this year’s budget will be as high as possible.

The incremental approach encourages managers in public sector organizations to look at the efficiency and effectiveness of activities undertaken.

Basic trend

Cyclical variation

Random fluctuation

Seasonal variation

When contribution is equal to zero

When profit is equal to zero

When revenue is equal to contribution

When revenue is equal to fixed costs

When fixed costs are equal to contribution