Chapter 9, Problem 1QC

To determine

The correct option out of the given choices.

Answer to Problem 1QC

Option c. Budgetary slack is the appropriate term to describe the situation in which the manager intentionally over budgets expense or under budgets revenue.

Explanation of Solution

a.

Strategic planning: This option is not right as strategic planning is long-term planning for the organization and not associated with  budgetary planning.

b.

Participative budgeting: This is not the correct option because participative budget involves many levels of management in the budgeting process. So, it is not related to the budgetary slack.

c.

Budgetary slack: This option is correct as preparing budget is a tedious job. The manager intentionally creates a slack into the budget as to avoid uncertainty in future and to look actual performance better when benchmarking is incorporated with budgetary slack. Also, to retain the resources, when a compulsory budget cut event arises.

d.

Benchmarking: Benchmark is a target that management supposed to achieve in company performance. To achieve the performance, management has to involve in preparing a budget like the operational and financial budget. Thus, this is an incorrect option.