Final answer:
An operating budget focuses on forecasted income and expenditures linked to sales revenue, while a zero-base budget starts from scratch every year, assessing each expense as if it were new. To reduce costs and improve operational performance using budget data, scrutinizing line-items and comparing historical data with performance benchmarks is essential.
Step-by-step explanation:
Comparing and contrasting two types of budgets, the operating budget and the zero-base budget, can underscore their different approaches to managing finances. An operating budget is a detailed projection of all expected income and expenses based on forecasted sales revenue during a given period. It includes elements such as cost of goods sold, sales revenue, and various operational expenses.
On the other hand, a zero-base budget starts from a "zero base," with each year's budget being compiled as if from scratch, meaning no balances are carried over, and no expenditures are presumed to be necessary or automatic. To use budget data to reduce costs and improve operational performance, a manager must scrutinize all line-items for cost-cutting opportunities, especially within the zero-base budgeting framework, which is particularly effective for identifying and eliminating wasteful expenditures.
By comparing historical data and performance benchmarks, a manager can make informed decisions to optimize resources and enhance operational efficiency.