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Simulated Budgeting
The aim of this simulation is to introduce students to the imprecise and political nature of the budgeting process, without focusing excessively on numerical calculations. Students are asked to work in groups of five as directors of a mountain bike manufacturing company. Each student takes on a role from a choice of Sales, Production, Finance and Technical Directors, with one student being elected Managing Director. The task is to produce a financial plan.
Students receive notes on their role and are briefed in functional groups (e.g. all the Directors together). The roles are set up so that it is in the students' interest to argue for resources for their area of responsibility.
After 45 minutes of negotiation in teams, the plans for each team are put on to an OHP for comparison. Students are asked to explain their decisions in the light of the results to other groups.
The exercise generates a high degree of involvement and interest, with teams having to work against time and resource pressures. It clearly demonstrates the behavioural aspects of financial planning which are often particularly unclear to students who have little experience. Finally, the multitude of different solutions generated shows that there is no single right answer to this problem.
Ian Wycherly, School of Business, Oxford Brookes University
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