Budgetingmethodsand behaviour

Sincethe currentManagingDirectorandtheFinancialController joinedthePrecision PlasticsCompanyfiveyearsago,theyhave set allaspectsofthesalesandoperatingbudgetsfor thecompany.At thetimetheyjoinedthecompany,therewasahigh levelof staffturnover andsomeofthemoreexperiencedmanagershadretiredandhencetheydecidedtotakecontroloverthebudgetprocess.Overthepastfiveyears,aconsiderablenumberof experiencedmanagershave joinedthecompanywithresponsibilityformanagingbothcostandprofitcentre

areasof responsibility.Overthepastyear,thecompanyhasnotbeenmakingitsbudgetandsomemanagersappeartobesomewhatindifferenttoachievingthebudget.

TheManagingDirectorhasaskedyou,asaconsultingManagementAccountanttoreviewtheirsystemsandyoubelievetheymaybenefitbyintroducingaPARTICIPATORYBUDGETprocessratherthantheircurrentsystemwhichisverytop-down.

Required: Write a BRIEF report to the Managing Director explaining how the use of Participatory Budgeting may change the behaviour of their managers. Include in your report the potential benefits and costs of this participatory approach.