The senior management at Nelsons Limited believe the budgeting process has become too time-consuming and costly...
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The senior management at Nelsons Limited believe the budgeting process has become too time-consuming and costly as each business unit prepares its budget and then it is consolidated at a higher level. Each business unit manager spends a significant amount of time engaging in this activity and senior management believe this time could be spent more efficiently managing the day to day operations of the business unit. They also believe that the business units set the budgets at a level which is too easy to achieve and want to set more challenging budgets. Therefore, they have made the decision to transfer the setting and preparation of budgets to senior management as they have to review and approve it anyway. Required (1) Describe the role of budgeting in the strategic management process. (2 marks) (ii) What approach to budgeting is Nelson Limited moving to? Do you agree with the change to the budgeting process proposed? Provide reasons to justify your answer. (2 marks) The senior management at Nelsons Limited believe the budgeting process has become too time-consuming and costly as each business unit prepares its budget and then it is consolidated at a higher level. Each business unit manager spends a significant amount of time engaging in this activity and senior management believe this time could be spent more efficiently managing the day to day operations of the business unit. They also believe that the business units set the budgets at a level which is too easy to achieve and want to set more challenging budgets. Therefore, they have made the decision to transfer the setting and preparation of budgets to senior management as they have to review and approve it anyway. Required (1) Describe the role of budgeting in the strategic management process. (2 marks) (ii) What approach to budgeting is Nelson Limited moving to? Do you agree with the change to the budgeting process proposed? Provide reasons to justify your answer. (2 marks)
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