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Chapter 8

Setting the difficulty level of a budget

Expectations budget Aspirations budget

 A budget set at current  A budget set at a level which
achievable levels. exceeds the level currently
achieved.
 Unlikely to motivate managers to

improve but may give more  This may motivate managers to
accurate forecasts for resource improve if it is seen as
planning, control and attainable, but may also result in

performance evaluation. an adverse variance if it is too
difficult to achieve.

Illustrations and further practice

Now try TYUs 2 and 3.

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