Page 6 - CIMA OCS Workbook May 2019 - Day 1 Tasks

CIMA MAY 2019 – OPERATIONAL CASE STUDY

2 BUDGETING

EXERCISE 2(A) - FORECASTING

Question Your response

Discuss whether Time series analysis is most useful when there is a clear pattern to sales –
time series analysis i.e. trend + some type of seasonal or regular variation.
would be a useful For VitaMine there may be an increase in sales of vitamins and
technique for supplements in the winter, when consumers are more likely to be
VitaMine to use for
concerned about getting ill. However, it is not clear from the pre-seen the
forecasting future
revenue. extent of such seasonality. Furthermore, some of VitaMine’s customers are
global retailers, so summer/winter considerations will net off to some
extent due to geographical spread.

EXERCISE 2(B) - BUDGET PREPARATION

Question Your response

How does • Uses an incremental approach
VitaMine prepare • Based on standard costs
budgets? • Little participation from individual functional managers so very ‘top-
down’

EXERCISE 2(C) - BUDGETING APPROACHES

Question Your response

Discuss whether The main arguments in favour of a ZBB approach would be the following:
an incremental or • VitaMine is planning to expand the product range in 2019
ZBB approach • Given high growth to date, it may be very difficult to base future
would be most forecasts on historical results.
suitable for
VitaMine. However, it could be argued that an incremental approach would be
acceptably accurate:
• No change in customers or target markets as far as we know
• Also, an incremental approach would have been cheaper.

46 KAPLAN PUBLISHING