Question

• Differentiate between a top-down and bottom-up approach to developing a budget.
• Identify and explain the items that need to be considered when developing a cost-benefit analysis
• Determine when a budget becomes a tool in the controlling function of management.
• Explain the importance of a cost justification in relation to budget requests.

Answer 1

Answer 1: The difference between the top down approach and the bottom up approach includes as the top down approach directly includes the development of the high level budget where the senior management authorities are indulge. The top down approach includes the determination of the solution for the big problems in to the smaller section to make it more understanding. Whereas in the case of the bottom up approach, the particular departmental individuals and managers are involved in creating the budget and then it is forwarded to the upper authority for the approval.