MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

Question

A situation where budgeted revenues are intentionally under-estimated or budgeted costs are intentionally over-estimated is known as:
A. Participatory budget
B. Surplus budget
C. Budget slack
D. Deficit budget
E. Imposed budget

Answer

C. Budget slack

Explanation:
Budget slack occurs when managers intentionally adjust budget estimates to make targets easier to achieve. This often involves underestimating revenue projections or overestimating cost forecasts to ensure that the budget appears to be met or exceeded.

Tags: Budget Slack, Budgeting, Cost Estimation
Level: Level 1

Topic: Budgeting
Series: NOV 2015

Uploader: Dotse