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Abstract

Incremental budgeting can be used to project changes in the operations of a firm over a specific period of time. The main use of this approach has been to analyze alternatives in the decision‐making process. However, it can be valuable in long‐range‐planning. The advantage of the incremental approach is that it uses a step‐by‐step process, rather than developing one figure for the total change. This technique is easily combined with more traditional budgeting techniques. An incremental decision model can be developed in conjunction with the existing information system to provide such information as rate of return, cash flows, expenses, and revenues, on an incremental basis. The model can be used to simulate any anticipated changes for detailed analysis.