ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
A company allows each department manager to help set the departmental budget that they will later be judged against. Which style of budget setting is this?
This is participative budgeting. Managers who will be held accountable for the budget take part in setting it, which tends to increase their commitment and sense of ownership. An imposed budget is instead set by top management without the manager's input.
- AImposed budgeting
- BParticipative budgetingCorrect
- CIncremental budgeting
- DZero-based budgeting
Explanation
In participative (bottom-up) budgeting, the managers responsible for meeting the budget are involved in setting it. Imposed budgets are set by senior management with no input from the managers. Incremental and zero-based describe how the figures are built, not who sets them.
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