ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
A sales manager is asked to submit a sales budget on which her bonus will depend. She deliberately submits a figure lower than she expects to achieve so the target is easy to beat. What is this behaviour known as?
This is budgetary slack. The manager deliberately underestimates expected sales so the target is easy to beat and her bonus is secure. Slack means understating revenue or overstating costs in a budget, creating a cushion that makes performance look better than it truly is.
- ABudgetary slackCorrect
- BZero-based budgeting
- CIncremental budgeting
- DRolling forecasting
Explanation
Deliberately understating revenues or overstating costs to make targets easier to achieve is budgetary slack (padding). The other options are budgeting methods, not behaviours of building in a cushion.
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