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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Kestrel Foods plc starts its annual budget each year by taking last year's actual results and adding 3% for inflation. Managers are not asked to justify existing spending. Which budgeting approach is Kestrel using?

Kestrel is using incremental budgeting. It starts from last year's actual results and adds a percentage uplift, without requiring managers to justify existing spending. This differs from zero-based budgeting, which builds every cost from nothing and demands justification of each activity.

  1. AZero-based budgeting
  2. BIncremental budgetingCorrect
  3. CActivity-based budgeting
  4. DRolling budgeting

Explanation

Incremental budgeting takes the prior period's figures and adds or subtracts an adjustment. Zero-based budgeting would require every item to be justified from scratch, which is not happening here. Nothing in the scenario involves cost drivers or continual updating.

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