-Zero Base Budgeting The idea behind zero-base budgeting is to divide enterprise programs into packages composed of goals, activities and needed resources and then to calculate costs for each package from ground up. By starting the budget of each package from base zero, budgeters calculate costs afresh for each budget period; thus they avoid the common tendency in budgeting of looking only at changes from a previous period. This technique has generally been applied to so-called support areas, rather than to actual production areas like marketing, research and development, planning and finance. The various programs thought to be desirable are costed and reviewed in terms of their benefits to the enterprise and are then ranked in accordance with those benefits and selected on the basis of which package will yield the benefit desired. The principle advantage of this technique is, of course, the fact that it forces managers to plan each program package afresh.

Traditional Non-budgetary Control DevicesExamples of non-budgetary control devices are use of statistical data of many aspects of the operation, special reports and analysis of specific areas, the operational audit and personal observation.

Time-Event Network Analysis

Time-Event Network Analysis is also called the Program Evaluation and Review Techniques (PERT).

Gnatt ChartsThis chart shows time relationships between events of a production program. Gnatt recognized that total program goals should be regarded as a series of interrelated supporting plans (or events) that people can comprehend and follow. The most important development of control reflects this simple and basic principle of control, such as picking out the more critical elements of a plan to watch carefully.

Program Evaluation and Review Technique (PERT)This is developed by Special Project Office of the US Navy.

Major Features of the PERT This is a time-event network analysis system in which the various events in a program or project are identified, with a planned time established for each. These events are placed in a network showing the relationships of each event to the other events. Each circle represents an eventsupporting plan whose completion can be measured at a given time. The circles are numbered in an order in which the events occur. Each arrow represents an activitythe time consuming element of a program, the effort that must be made between events. Activity time, represented by the numbers beside the arrows, is the elapsed time required to accomplish an event. This activity time, can be expressed all in optimistic time, and estimate of the time required if everything goes exceptionally well; most likely time, an estimate based on the time the project engineer really believes is necessary for the job; and pessimistic time, a time estimate based on the assumption that some logically conceivable bad luckother than a major disasterwill be encountered. These three estimates are required where; it is very difficult to estimate time accurately. The next step is to compute the critical path, that is, sequence of events which takes the longest time and which has zero (or the least) slack time. It is customary to identify several crucial paths in order of importance. Although the critical path has a way of changing as key events are delayed in other parts of the program, identifying it at the start makes possible close monitoring of this particular sequence of events to ensure that the total program is on schedule. When more than 200 to 300 events are involved, it is virtually impossible to handle the calculation without a computer.

Strength and Weaknesses of PERT There are five important advantages of PERT.1. It forces managers to plan, because it is impossible to make a time event analysis without planning and seeing how the pieces fit together. 2. It forces planning all the way down the line, because each subordinate manager must plan the event for which he or she is responsible. 3. It concentrates attention on critical elements that may need correction. 4. It makes possible a kind of forward looking control; a delay will affect succeeding events and possibly the whole project if manager doesnt take appropriate action.5. The network system with its subsystems enables managers to aim reports and pressure for action at the right spot and level in the organization structure at the right time.

Limitations of PERT1. This technique is not useful when a program is nebulous and no reasonable guess-time of schedule can be made.2. Major disadvantage of PERT is, it emphasis on time only, and not on cost. While this focus is suitable for programs in which time is of the essence or in which, as so often is the case, time and costs have a close, direct relationship. The tool is more useful when considerations other than time are introduced into the analysis.