You have been elected onto the budget committee of a hospital and have been tasked with reviewing the approach taken by the hospital towards budget-setting. The hospital has a relatively stable level of income which comes from government allocations. At the same time it has a very high proportion of fixed costs which are largely made up of salary and wage costs. The hospital engages in a wide and diverse range of activities.

Required:

Identify and discuss the factors which should be considered when selecting a suitable budget-setting approach for the hospital.