ACCA Applied Skills · Performance Management · Budgetary systems and types of budget
Which of the following is a recognised disadvantage of incremental budgeting?
A key disadvantage of incremental budgeting is that it may carry forward past inefficiencies and budgetary slack, since existing spending is assumed to be justified. The time-consuming justification and ranking described in other options belong to zero-based budgeting.
- AIt may perpetuate past inefficiencies and build in budgetary slackCorrect
- BIt requires all activities to be justified from a zero base each year
- CIt is time-consuming because decision packages must be ranked
- DIt requires detailed identification of cost drivers for every activity
Explanation
Because incremental budgeting assumes existing spending is justified, inefficiencies and slack can carry forward. The other options describe the demands of zero-based budgeting (justification, ranking) and activity-based budgeting (cost drivers), which are not disadvantages of incremental budgeting.
Did you get it right without looking?
One question tells you little. A timed set on Budgetary systems and types of budget shows your real accuracy, how long you take and where you lose marks.
More Budgetary systems and types of budget questions
- Which of the following best describes the role of the budget committee in the budget preparation process?
- Zenco budgeted production of 10,000 units at a total cost of $190,000, of which $50,000 is fixed. Actual production was 12,000 units at an a…
- Which statement about a fixed budget is correct?
- Which of the following is the main reason an organisation might adopt activity-based budgeting (ABB) instead of incremental budgeting?
- A manager argues that next year's budget for the maintenance department should simply be this year's figure increased by expected inflation …
- A company prepares a budget for the next twelve months. At the end of each quarter, the quarter just ended is dropped and a new quarter is a…