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Hello, Sir. In this question i actually didnt get point why in the answer they do not include the effect of next years inflation when calculating salaries and capital expenditure.
The have included the effect of inflation when calculating the salaries.
The increase will be half way through the year and so they have taken half the year at the current amount plus half a year at an amount inflated by 2% (see workings 2!)With regard to the capital expenditure, the question says that it ‘will be’ 145,000 or it ‘will be’ 80,000. It does not say that it will be 145000 plus inflation so presumably any inflation has been taken into account when they estimated these figures.
So that 2% is the adjustment for inflation in working 2 or it is an adjustment for pay rise of 2%? Or they should be taken into account as the same?
Imagine that you are given a pay rise of 2%.
Although part of the reason for them giving you a pay rise of 2% might be because there is inflation in the country, you would surely assume that your pay will increase just by 2% (not by the 2% they told you, plus an extra X% because there is inflation at X%) 🙂
Salaries only ever increase by the amount the employer decides to increase them by (which may be more than inflation, less than inflation, or the same as inflation!)
Sir, the d) question says, discuss the extent to which zero-based budgeting (ZBB) could be used by Newtown School to improve the budgeting process?
But I don’t really understand what is discretionary cost, and when to use ZBB ?
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