ICAEW BIP · Chapter 6 · Question 4 of 11
Which of the following best describes zero-based budgeting?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Each activity must be justified as if it were being started for the first time, and resources are allocated according to ranked decision packages
Explanation
Zero-based budgeting starts from a base of zero. Managers identify decision packages for each activity, assess their costs and benefits, and rank them so that limited resources go to the most worthwhile activities. It is especially suited to discretionary costs such as training or marketing, but it is time-consuming to carry out.
More Budgeting: purposes and approaches MCQs
- Q6Which of the following is a recognised disadvantage of participative (bottom-up) budgeting?
- Q7Activity-based budgeting (ABB) differs from traditional budgeting mainly because it:
- Q8What is a fixed budget?
- Q9Which document sets out the instructions, procedures, timetable and responsibilities for preparing the budget?
- Q10A manager compares forecast results for the rest of the year with the budget and takes action now to correct an expected shortfall before…