Five (5) disadvantages of incremental budgeting.



Incremental budgeting is the process whereby this year’s budget is set by reference to last years actual results after an adjustments for inflation and other incremental factors. read more

Three (3) advantages of incremental budgeting.

Three (3) advantages of incremental budgeting.



Incremental budgeting is the process whereby this year’s budget is set by reference to last years actual results after an adjustments for inflation and other incremental factors.

The following are advantages of incremental budgeting:

  • it is quick to do and relatively simple process;
  • the information for making incremental budget is readily available, so very limited quantitative analysis is needed;
  • it is appropriate in some circumstances for example, in stable business the amount of stationery spent on one year is unlikely to be significantly in the next year, so taking the actual amount spent on year one and adding a little for inflation should be reasonable target for amount required to be spent in the next year. 
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    Environmental cost – meaning

    Environmental cost - meaning



    Various organization has come up with different definition of the term environmental cost. So there is no definitive answer to question “what is meant by environmental costs? In most cases the term is taken to mean any cost that have relevance to the environment.

    The following are perhaps the most significant environmental costs:

  • Image and relationship costs. The environment is important political issue. Many organization that has committed environment crimes have suffered as result of product boycott, which have affected their profits. many organization spend huge amount of money to publicize their environmental credentials.
  • Cost of waste, particularly wasting scarce resources, such as energy and water.
  • Cost of compliance with environmental regulations or voluntary codes. These cost may include cost of employing compliance officer and monitoring equipment.
  • Cost incurred to protect the environment such as investing in production process to reduce pollution.
  • Cost of cleaning up pollution or contamination caused by organization activities. 
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    Differences between standard cost and target cost.

    Differences between standard cost and target cost.

    A standard cost is predetermined budgeted unit cost of product or service, under specified working conditions. These conditions are normally the current actual working condition – so the standard will basically reflect what would be achieved under the existing working conditions.
    A target cost, on the other hand, is the desired cost. It may not be achieved under current working condition but will require changes in production methods. read more