Skip to content

CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control

Which statement about zero base budgeting (ZBB) is correct?

In zero base budgeting every activity must be justified afresh each period, with decision packages ranked by their benefit. It does not simply adjust the previous budget for inflation, which is traditional incremental budgeting, nor roll forward periodically.

  1. AEvery activity must be justified afresh each period and ranked through decision packagesCorrect
  2. BNext year's budget is the current year's budget adjusted for inflation
  3. CBudget is revised continuously by adding a new period as each period expires
  4. DBudget is prepared only for the principal budget factor

Explanation

ZBB starts from zero; each activity is justified through decision packages that are ranked by benefit. Incremental adjustment describes traditional budgeting, and adding a new period as one expires describes rolling budgets.

Did you get it right without looking?

One question tells you little. A timed set on Budgets and Budgetary Control shows your real accuracy, how long you take and where you lose marks.

Practise Budgets and Budgetary ControlFree diagnostic mock

More Budgets and Budgetary Control questions