You and one of your MBA classmates have just started a company to sell a niche product. Although both of you do not have past experience with this product, both of you have sufficient funds to run the business. To assist in the business, the company recruited a few staff including an expert on the product and a finance manager who previously worked in a similar industry. One of the tasks at the start of the business is to make an annual budget. You and your classmate are contemplating whether the company should ready a top-down budget or make a bottom-up budget.

(i) Compare the process and the advantages of preparing a top-down budget and a bottom-up budget. (12 marks)

(ii) Propose and justify the budget preparation method that should be adopted by your company. (4 marks)