Question

LO 7.1What are the advantages and disadvantages of the bottom-up budgeting approach?

Answer 1

The following are the disadvantages and the advantages of bottom-up budgeting approach are as follows:

Advantages of bottom-up budgeting approach:

• The bottom-up budgeting approach helps in making the decisions very quickly as compared to all other budgeting methods.
• The main benefit of the bottom-up budgeting approach is that it helps in aligned the project goals in an organization by giving the specific direction.
• It helps in understand the resources, needs, expenses and the cost of each department in an organization.

Disadvantages of bottom-up budgeting approach:

• The bottom-up budgeting approach is complex as it sometimes cause misrepresent the budget figures in the given data.
• In this budgeting method there is also a lack of context and also expertise.