ACCA Applied Knowledge · Management Accounting · Budget preparation
Which of the following is an advantage of participative budgeting?
Participative budgeting improves managers' commitment to achieving the budget. Because they help set the targets, they feel ownership and are more motivated, although the process is slower and can lead to budgetary slack.
- AIt is the quickest method of setting budgets
- BIt guarantees that budgets support top management's strategic aims
- CIt improves managers' commitment to achieving the budgetCorrect
- DIt prevents managers from building in budgetary slack
Explanation
Involving managers in setting budgets increases ownership and commitment. It is slower than imposed budgets and can encourage slack, and it does not guarantee alignment with strategy.
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