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ZERO-BASED BUDGETING.   Term Paper ID:29452 Click to get this paper

Essay Subject: Examines the process.... More...

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Paper Abstract: Examines the process. Defines zero-based budgeting (ZBB) and explains how it works. History of ZBB; role of Jimmy Carter as Governor of Georgia and President of the United States. Implications of the ZBB concept; justification of all costs with each new budget. Top down management application of the ZBB concept. Managerial tool. Paper Introduction: ZERO-BASED BUDGETING Introduction This research examines the zero-based budgeting process. The dual purpose of the paper is to (1) define zero-based budgeting and (2) explain how the process works in practice. Placing Zero-Based Budgeting in Context A budget is a detailed financial plan that indicates (1) the financial resources expected to be available to an organization during a specific time interval; (2) the anticipated source(s) of the financial resources; and (3) how the organization intends to use the financial resources. Budgeting is the process involved in the creation of the detailed financial plan called a budget. There are many different types of budgets, and many different budgeting processes (Garrison & Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. M., III. Once decisions have been made,funding is established, and the operational plan is executed (Birkin &Woodward, 1997). These actions are asfollows (Garrison & Noreen, 2 ): > Establish objectives for her or his function and gain agreement on them > Define alternate ways of achieving these objectives > Select the most practical way of achieving each objective > Break that alternative into incremental levels of effort > Assess the costs and benefits of each level, and > Describe the consequences of disapproval Applying the ZBB Concept The budget submission is structured in decision packages, each ofwhich reflects one incremental level. In fact, ZBB got its name from the fact thatmanagers are required to start at zero budget levels each year and justifyall costs as if managers were initiating the programs involved for thefirst time. Conclusion ZBB, when first introduced, was thought to be the way of the future(Person, 1996). Eliminate non-value-added costs. Decision units may be defined by criteriathat are organizationally, functionally, or strategically oriented (Coe,1997). (1992). In most cases, areas susceptible to the use of ZBB in privatesector organizations include (1) engineering, (2) finance and accounting,(3) forward product development, (4) insurance, (5) legal and managementservices, (6) manufacturing and sales staffs, (7) marketing, (8) personnel,and (9) research and development. Poring over budget line items will cut costs. M. (1997, March-April). Zero-based budgeting: A decision package manual. A zero-base approach to accounting for sustainable development. ZBB, as is true of most other management processes,has turned out to be one more managerial tool. A decision package is a discrete function or operation described in adefinitive manner for management evaluation and comparison to otherfunctions. All of the packages are ranked inorder of priority. A. 1). All costs must be justified with each new budget.This justification is accomplished through a series of decision packages,in which each manager ranks according to importance (from the top down) allactivities of a unit of an organization according to importance. How structural conflicts stymie reinvention. ZBB is defined as a planning and budgeting process requiring eachmanager to accomplish a number of specific actions. These stepsare as follows: > Defining decision units > Setting objectives and structuring alternatives > Describing activities in terms of decision packages and alternatives > Ranking decision packages, and > Conducting a post-implementation performance audit A decision unit is a cluster of activities for which (1) a givenmanager may be held accountable, and (2) a specific cost (input) andbenefit (output) may be defined. Considering theseareas of activity, it becomes obvious that ZBB is most useful in privatesector organizations in is those areas that are (1) capital or laborintensive, and (2) for which the development precise production standardsin a readily obtainable manner is not feasible (Knipp, 1997). A part of the reason for the varied reactions was that theZBB name implied to many people a reduction of expenditures to levels wellbelow current spending. All other packages are deferred or eliminated(Birkin & Woodward, 1997). (2nd ed.). Thisprocess is supposed to permit the top management in an organization toevaluate each decision package separately, and to eliminate or cut backthose activities that are the least essential to the organization, in thosesituations where not all of the proposed activities can be funded (Person,1996). Defining Zero-Based Budgeting The ZBB concept, according to the American Management Association,generated a "wide variety of reactions ranging from excitement to fear and ... (2 ). Those packages ranked above a predefined level ofaffordability are approved. Industrial Management, 44(3), 22-28.Birkin, F., & Woodward, D. In most instances in private sector organizations, thenecessary monitoring in zero-based budgeting is accomplished through aconventional management review cycle. (2 2, May-June). Hotel & Motel Management, 211(8), 11-14.Person, M. At the same time, the process recognizes that, while needsmay be infinite, resources are always limited. There are five major steps involved in the ZBB process. M. The new budgeting process gained rapid acceptance. The Zero-based hospital: Survival and success in America's evolving healthcare system. ZBB is also used, at times, by privatesector organizations in the capital budgeting process. Techniques employed in theranking process range from votes by management committees to the use ofdecision tables and paired comparisons. The performance audit is the control mechanism of zero-basedbudgeting. Philadelphia: W. It is useful in some areas,and not in others. Public Administration Review, 57(2), 168-173.Finkler, S. This ranking processrequires an evaluation of the competing decision packages within thecontext of organizational objectives - both short-term and long-term. In 197 , a new budgeting process, called zero-based budgeting (ZBB)was introduced. H., & Noreen, E. Ranking the decision packages, essentially, is a process of selectingfrom among the alternative courses of action. Essentially, the ZBB concept means that managers can view no costs asongoing in character. In the more traditional budgeting processes, expenditures areinitiated on an incremental basis, whereby a manager begins with the budgetfor the preceding period, and either adds or subtracts from those amounts,as is appropriate. (1997, May 6). The principal elements in a decision package are (1) theobjective, (2) a description of the approach to the activity, (3) a listingof the alternatives considered and rejected, (4) the costs and benefitsassociated with the proposed approach, and (5) an assessment of what willlikely occur is the decision package is not funded (Birkin & Woodward,1997). This approach is not unusual with respect to newmanagement processes. A., & Cheek, L. Theranking process limits an organization to the most productive set ofalternatives. The dualpurpose of the paper is to (1) define zero-based budgeting and (2) explainhow the process works in practice. Managerial Accounting. By the end of the 197 s, the federalgovernment, several state governments, and more than 1 major privatesector corporations had adopted ZBB (Austin & Cheek, 1979). WhenJimmy Carter became governor of Georgia in 1971, he introduced ZBB intothat state's fiscal management activities, and six years later, when hebecame President, he introduced ZBB into the management of fiscal affairsin the federal government. Washington: Health Administration Press. New York: Irwin McGraw-Hill.Knipp, H. Zero-based budgeting Introduction This research examines the zero-based budgeting process. The ZBB format is not an incremental type of budget (Finkler,1992). In private sector organizations, ZBB is typically used (when it isused) in any area for which it is possible to conduct a cost/benefitanalysis, and for which standard costs do not exist and would be uneconomicto develop. Other monitoring techniques employedwith zero-based budgeting include the use of internal staff audits, topmanagement review, and, in some cases, review by a board of directors(Baker, 2 2). Management Accounting (British), 75(11), 4 -42.Coe, B. B. W. Saunders Company.Garrison, R. (1996). (9th ed.). New York: AMACOM, 1979.Baker, W. (1979). hostility" (Austin & Cheek,1979, p. Budgeting concepts for nurse managers. There are many different types of budgets, and manydifferent budgeting processes (Garrison & Noreen, 2 ). A. Placing Zero-Based Budgeting in Context A budget is a detailed financial plan that indicates (1) the financialresources expected to be available to an organization during a specifictime interval; (2) the anticipated source(s) of the financial resources;and (3) how the organization intends to use the financial resources.Budgeting is the process involved in the creation of the detailed financialplan called a budget. ZBB, however, requires a re-justification of all costswith each new budget. (1997, December). ReferencesAustin, L. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.