ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting
A manager is given a budget with no input into its preparation and is told it is a strict target. Which behavioural outcome is most likely?
An imposed budget with no manager involvement usually reduces commitment and acceptance, and may cause resistance or demotivation. Managers feel no ownership of the target. Participative budgeting is generally associated with better acceptance and motivation.
- AHigher motivation because the target is clearly set
- BReduced commitment to the budget and possible resistance to itCorrect
- CAutomatic improvement in goal congruence
- DElimination of budgetary slack
Explanation
Imposed budgets lack participation, so managers are less likely to accept or feel ownership of targets, reducing commitment. Participation tends to improve acceptance. Slack is not eliminated by imposition and goal congruence is not improved automatically.
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