Jimmy Carter, who introduced ZBB for resources allocation and control in government explains, In ZBB, the budget - PowerPoint PPT Presentation

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Jimmy Carter, who introduced ZBB for resources allocation and control in government explains, In ZBB, the budget

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Title: Jimmy Carter, who introduced ZBB for resources allocation and control in government explains, In ZBB, the budget


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Management Control Systems info_at_casestudyhelp.in
91 94220-28822
2
  • Management Control Systems
  • Case Study (20 Marks)
  • Methodology Jimmy Carter, who introduced ZBB
    for resources allocation and control in
    government explains, "In ZBB, the budget is
    broken into units called DPs which are prepared
    by managers at each level. These packages include
    an analysis of purpose, cost, measures of
    performance and benefits, alternative courses of
    action and consequences of not performing the
    activity. Then all packages are to be ranked in
    order of priority. After several discussions
    between department heads and the chief executive,
    the rankings are finalized, and packages up to
    the level of affordability are approved and funded

3
  • In more specific terms the ZBB methodology
    as well as the sequential stages in its
    introduction may be outlined as follows
    Defining the Decision Units (DUs)within the
    firm A DU is a tangible activity or group of
    activities for which a single manager is
    responsible for successful performance. The DU
    concept is akin to that of the responsibility
    center. A traditional cost center, a group of
    people or even a project may be a DU. Defining
    objectives of each DU In clear and specific
    terms and in conformity with the enterprise,
    objectives and goals. Identifying activities in
    the form of DPs The term D P focuses on the
    analysis of each activity in the manufacturing
    process according to the incident of the relevant
    cost and the importance of that activity in the
    overall cost structure of the organization. Thus,
    in essence DPs not only refer to the costs but
    also the benefits of an activity of process.

4
  • Ranking of alternative DPs in the order
    of decreasing benefit to the organization, using
    cost-benefit analysis technique. This problem can
    be reduced by concentrating on marginal priority
    packages. This is because ultimately all the
    packages presented for funding would generally
    fall into three categories (1) those with a high
    priority and high probability of funding (2)
    those with a marginal priority and which may be
    funded or not funded depending on the resources
    available, and (3) those with a low priority and
    low probability of funding. Forwarding the
    ranked DPs to the next higher organizational
    units, for review, merger with other comparable
    DPs and for re-ranking (as the DPs are
    consolidated and re-ranked, the perspective and
    objectives are broadened). The consolidation and
    re-ranking should preferably be done by a
    committee comprising all managers whose DPs are
    being considered and a chairman selected from the
    next higher organizational level.

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  • Finalization of the budget proposal as
    well as preparation of budgets for each DU have
    to be finally approved by the top management.
    Before according approval, the top management is
    guided, on the one hand, by the principle of
    allocating resources to the OPs showing higher
    benefit to cost ratios, and the question of
    affordability, on the other.
  • Answer the following question.
  •  
  • Q1. Explain the stages in specific terms of ZBB
    Methodology.

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