Approaches to budgeting

In this lesson

1. 0:00 Section Two: Approaches to Budgeting
2. 0:21 Top Down vs Bottom Up Budgeting
3. 1:10 Rolling Budgets: Continuous Updates
4. 3:49 Incremental Budgets: Build on Prior Period
5. 6:22 Zero Based Budgeting: Justify Every Activity
6. 8:41 Activity Based Budgeting: Cost Driver Focus
7. 12:23 Master and Functional Budgets
8. 15:37 Worked Example: Raw Material Purchases
9. 18:51 Fixed vs Flexible Budgets
10. 20:01 Flexed Budget Calculation: Step Changes

About this lesson

You'll also explore functional budgeting, how to work with principal budget factors, and the difference between fixed and flexible budgets, all supported by worked examples to help you understand when and why to use each approach. Understanding different budgeting approaches is essential for Performance Management and other management accounting papers. The video explains how each method works in practice, from the strategic choice between imposed and participative budgeting to the mechanics of building departmental budgets that feed into a master budget. You'll see how to identify the principal budget factor (usually sales), trace it through production and material budgets, and then flex budgets to reflect different activity levels—skills you'll need to apply confidently in your exams. The worked examples show you how to calculate budgeted material purchases by working through opening and closing inventory, and how to construct flexed budgets when fixed costs step up at certain production levels. By the end, you'll understand the trade-offs between simplicity and accuracy across budgeting methods, and be able to justify which approach suits different organisational contexts.

Duration: 22m