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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

At Kellerman Co, sales managers know that bonuses are paid when actual sales exceed budget. During budget setting they deliberately understate expected sales, and the finance team accepts the figures without challenge. Which behavioural problem is this?

This is budgetary slack. Managers deliberately understate sales to make the target easy to beat and earn bonuses, and weak challenge from finance allows it. It reduces budget accuracy and distorts resource allocation.

  1. ABudgetary slackCorrect
  2. BGoal congruence
  3. CBudget bias caused by top-down imposition
  4. DIncremental drift

Explanation

Managers are deliberately building easy targets into the budget to secure bonuses. This is budgetary slack, which arises when participation and rewards are linked to meeting budget without adequate review. Goal congruence is the desired alignment, not the problem described.

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