CMA Intermediate · Cost Accounting · Budget and Budgetary Control
Which of the following is a recognised limitation of Zero Base Budgeting?
A recognised limitation of ZBB is that it consumes considerable time, paperwork and managerial effort because every activity must be described, justified and ranked in each period. The other statements describe incremental budgeting, which carries past spending forward without fresh justification.
- AIt requires considerable time, paperwork and managerial effort each budget periodCorrect
- BIt encourages continuation of obsolete activities
- CIt does not require managers to justify existing activities
- DIt relies solely on the previous year's expenditure
Explanation
ZBB demands that every activity be analysed, documented and ranked, which takes a lot of time and effort. The other options describe weaknesses of incremental budgeting, not ZBB.
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