ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control
Dunmore Retail's sales director participates in setting her budget and negotiates a sales target that she knows is comfortably achievable, while the bonus depends on meeting it. She also overstates the marketing spend she will need. What behavioural problem is this?
This is budgetary slack. The manager uses her participation to understate revenue and overstate costs so the target is easy to beat and the bonus is secure. It is not pseudo-participation, which is token involvement, nor phasing, which concerns timing of budget figures.
- ABudgetary slackCorrect
- BPseudo-participation
- CGoal congruence
- DBudget phasing
Explanation
Deliberately building easy targets and padding expenses to make achievement easy is budgetary slack. Pseudo-participation is when involvement is only token. Goal congruence is alignment of goals, which is lacking here, and phasing is spreading a budget across periods.
Did you get it right without looking?
One question tells you little. A timed set on Budgetary planning and control shows your real accuracy, how long you take and where you lose marks.
More Budgetary planning and control questions
- Kestrel Logistics invites its depot managers to budget meetings, but senior management has already fixed the figures and uses the meetings o…
- Dalton Retail's board wants its budget to be updated every month by adding a new month at the end, so that managers always look twelve month…
- Harlow Pharma operates in a volatile market where demand and input prices change rapidly. Its annual fixed budget is agreed in November and …
- Kestrel Foods plc starts its annual budget each year by taking last year's actual results and adding 3% for inflation. Managers are not aske…
- Linden Care, a not-for-profit hospice, receives a fixed annual grant and donations. Its managers argue that budgets should start from the ne…
- Tovar Ltd's budget for a project has a mean cost of 500,000 with a standard deviation of 50,000, assumed normally distributed. Using normal …