Quiz for B2 - Budgeting concepts

k.sankar.ra
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Quiz for B2 - Budgeting concepts

Postby k.sankar.ra » Sat Apr 30, 2016 7:15 am

Following is the response I received from Sapna for the following MCQ
2. Q. 36 Which of the following is not a benefit of the budget?
a. Budgets can help identify production bottlenecks.
b. Budgets are useful tools in performance evaluation.
c. Budgets eliminate the opportunity for slack or padding within an organization.
d. Budgets provide an early warning for cash crunch periods.
Explanation: answer (c)is correct. Because slack or padding may affect the budget effectiveness in planning & motivational roles, and also slack have
long term negative impact on budgeting.

However, in page 59 of the Edupristine Study Notes it is stated that budget committee ensures that slacks have been removed.
In page 60 of the same, it is stated that the role of the top management in successful budgeting is the removal of slacks by the top management.
In page 58 of the same, it is stated that only a budget that is participatively developed has the likelihood of having a slack.
In page 64 of the same, it is stated that experienced top management must review and eliminate or reduce slack.

In the light of the above, can it be stated that identification and elimination of slack is not a benefit of the budgeting process ?

edupristine
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Re: Quiz for B2 - Budgeting concepts

Postby edupristine » Wed May 25, 2016 5:37 am

Hi Sankar
In first one the Question is about to beneficiary for budget, and slack or padding is not beneficiary element in budget concept.
Elimination of slack should be done by the experienced professionals.
Budgeting games can probably never be eliminated, but method is being used to decrease
the amount of budget slack.


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