Historical Budgeting
Setting budgets based on previous year's actual figures, adjusted for expected changes.
Real World
Tesco sets its annual store staffing budget by taking last year's wage bill and adjusting upward by the rate of inflation — a classic historical budgeting approach that risks carrying forward any overspending from the prior year.
Exam Focus
When evaluating historical budgeting, always weigh its simplicity against the risk of embedding past inefficiencies into future plans.
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