ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
A department manager deliberately overstates expected costs and understates expected sales when submitting her budget proposal, so that the target will be easy to achieve. What is this behaviour called?
This behaviour is budgetary slack, also called padding. The manager deliberately overstates costs and understates sales to create a cushion that makes the target easy to meet. The other options are budgeting methods or timing techniques, not behaviour.
- ABudgetary slackCorrect
- BIncremental budgeting
- CZero-based budgeting
- DBudget phasing
Explanation
Deliberately building a cushion into a budget by overstating costs or understating revenues is budgetary slack, also called padding. Incremental and zero-based budgeting are budget preparation methods, and phasing refers to spreading a budget over periods.
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