ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
Which of the following is a recognised advantage of participative budgeting compared with imposed budgeting?
Participative budgeting increases managers' commitment to achieving the budget, because they feel ownership of targets they helped to set. It is normally slower than imposing budgets and can encourage budgetary slack, and it does not guarantee goal congruence with senior management.
- AIt is quicker to complete the budget process
- BIt increases managers' commitment to achieving the budgetCorrect
- CIt prevents budgetary slack from being built in
- DIt guarantees goal congruence with senior management
Explanation
Involving managers gives them ownership, which increases motivation and commitment to targets. Participation is usually slower, not quicker. It also makes slack more likely, because managers know their own area and can pad budgets. It does not guarantee goal congruence.
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- Which of the following is the main behavioural disadvantage of participative budgeting?
- Which of the following approaches is MOST likely to encourage managers to build slack into their budgets?
- Which of the following is a likely behavioural problem when a manager's budget is imposed by senior management with no consultation?