DW, a transport company, operates three depots.

Each depot has a manager who reports directly to the Operations Director.

For many years the depot managers have been asked by the Operations Director to prepare a budget for their depot as part of the company’s annual budgeting process. A new depot manager has been appointed to the Southern region and he has concerns about the validity of these annual budgets. He argues that they soon become out of date as operational circumstances change. At a recent manager’s meeting he said, “They are restrictive. They do not permit the depot managers to make decisions in response to operational changes, or change working practices for next year until that year’s budget has been approved.”

Required:

(a) Explain the differences between the above annual budgeting system and a rolling budget system.

(b) Discuss how the Southern region depot manager could use a rolling budget system to address his concerns.