Question Two Kampala International School (KIS) is a day and boarding secondary school located in Bukoto trading centre. KIS opened gates to the public in 2015 with only 3 classes; senior one, senior two and senior five. KIS has a bursar who holds a Diploma in Business Administration (DBA) and is fully in charge with preparing the school termly budgets. The directors of the school have faced a lot of budget challenges in the last three years and are determined to have a solution with the current school size. The Board of Governors (Board) resolved, during their last meeting, to recruit a Budget Manager and is expected to start with developing the budget of term 2 for academic year 2022. KIS operates on a term basis and closed term 1 with cash balance of Shs 1 million and bank balance of Shs 8.5 million. School fees debtors balance at the end of term 1 was Shs 28.125 million and normally 10% of the school fees debtors do not report back. 80% of school fees debtors that report back settle all their balances within the first month of the term while 20% are always considered uncollectible. Normally 70% of the school fees for a term is collected in the first month, 15% in the second month and 7.5% in the third month. Maize flour constitutes 40% of domestic costs and its supplier is always paid 60% in the month of delivery and the balance in the next month. In January 2022, Stanbic Bank extended a short-term 20% loan to the school of Shs 60 6 million to be paid in three equal installments within the first month of each term. The loan was intended to finance the construction of a computer laboratory which was estimated to cost Shs 100 million to completion in Term 2. The 2022 budget extract for Term 1 was as below: Jan Shs 000 Feb Shs 000 March Shs 000 Personnel costs 35,450 35,450 35,450 Domestic costs 58,550 58,550 58,550 Administration costs 19,300 19,300 19,300 Other costs 21,600 21,600 21,600 Staff members were not happy with Term 1 remuneration which was 80% of personnel costs and the Board has agreed to increase staff salaries by 5% with effect from April 2022 when Term 2 begins. Staff salaries are paid on the 5 th day of the subsequent month. Due to increased enrollment in 2022, the fees collections are expected to increase by 28% in Term 2. Domestic and administration budgets are expected to increase by 20% and 10% respectively. Other costs are to be tightly managed with a minimal increase of 5%. You are the experienced Budget Manager hired by the Board to streamline the budgeting process at KIS. Required: (a) Using t h e i n f o r m a t i o n provided a b o v e , a d v i s e KI S m a n a g e m e n t on whether the computer laboratory will be completed in term 2 as planned. (30 marks) (b) Justify why incremental budgeting approach is not commonly used by organizations. (5 marks) (c) Budgeting has been criticized as A Cumbersome process which occupies considerable management time Concentrating unduly on short-term financial controls Having undesirable effects on the motivation of managers Emphasizing formal organizational structure 7 Required: Explain the above criticisms and discuss the changes required in response to the criticisms so as to improve the budgeting process. (15 marks)