Advanced A company that has hitherto prepared its operating budgets on a single target level of performance is considering changing to one of the following:

(i) a three-level budget;
(ii) a decision tree analysis leading to a calcula¬ tion of joint probabilities of budget levels;
(iii) a simulation of probabilities of budget levels (probably computer-based).
You are required to:

(a) explain briefly the method of constructing budgets for (i), (ii) and (iii) above;

(b) comment briefly on the advantages that would result from choosing:
method (i) over the existing method; method (ii) over method (i); method (iii) over method (ii). (20 marks) CIMA P3 Management Accounting