‘A zero-based budgeting system involves establishing decision packages that are then ranked in order of their relative importance in meeting the…

A. The activities that are being proposed in a budget are described in variable packages. There will often be more less than one decision package proposed for an activity.

B. The activities that are being proposed in a budget are described in decision packages. There will often be more than one decision package proposed for an activity.

C. Some of these packages will be inclusive and will require operations to select the best solution to the issue involved.

D. Some of these packages will be mutually inclusive and will require management to select the best solution to the issue involved.

E. Each decision package is evaluated. Its costs are compared to its benefits and net present values or other measures calculated.

F. Management may decide to reject packages even though the activity was done last year. In this way the organization is said to be starting from a zero base with each package given due consideration.

G. Management may decide to accept packages even though the activity was done last year. In this way the organization is said to be starting from a 100% cost base with each package given due consideration.

H. In a public sector body, for example, decision packages will relate profit making activities.

I. In a public sector body, for example, decision packages will relate to very disparate activities.