The managing director of your company believes that the existing annual budget system is costly to operate and produces unsatisfactory results due to: long preparation

Question

90 users unlocked this solution today!

The managing director of your company believes that the existing annual budget system is costly to operate and produces unsatisfactory results due to: long preparation period; business decisions being made throughout the year; unpredictable changes in the rate of general inflation; sudden changes in the availability and price of raw materials. He has read about rolling budgets and wonders whether these might be more useful for his decision-making. You are required, as the management accountant, to prepare a paper for him covering the following areas.
(a) A brief explanation of rolling budgets;
(b) How a rolling budget system would operate;
(c) Three significant advantages of a rolling budget system;
(d) Three problems likely to be encountered in using a rolling budget system.