Mandalay Ltd. is a company that manufactures fishing equipment and is owned by Managing Director, Joseph Cooper. It began trading two years ago, and has seen sales and profit grow at a good rate over the past 12 months. Due to this recent growth, Mandalay Ltd is planning a programme of expansion and as part of this is looking to recruit to its existing Finance department. Presently, the company employs one accountant who has overseen all areas of work but is now looking to split this into distinct financial and management accounting roles.

Alongside this, the company is looking to formalise the budget process. Joseph is keen to learn about different approaches to setting the budgets. He has heard about the incremental approach and zero based budgeting, but knows very little detail about them.

Required: Write a business memo to Joe Cooper that:

(a) Explains the role of management accounting in an organisation. (6 marks)

(b) Explains the purposes of preparing organisational budgets for Mandalay Ltd (10 marks)

(c) Describes both of the approaches to budgeting mentioned in the detail above and explains the potential advantages of each approach.