ACCA MA · Chapter 10 · Question 8 of 11
Which of the following is a disadvantage of participative (bottom-up) budgeting?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Managers may build slack into their budgets to make targets easier to achieve
Explanation
When managers help set their own budgets they may overstate costs or understate revenues (budgetary slack) so their targets are easier to meet. The advantages of participation are greater commitment and the use of local knowledge. Senior managers still review and approve the budgets.
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