What is the main feature of zero-based budgeting?
Answer and explanation
Correct answer: B. Each activity must be justified from scratch for the new period, whatever was spent in the past
- Step 1: Zero-based budgeting starts from a base of zero.
- Step 2: Managers must justify every item of expenditure.
Answer
Each activity must be justified from scratch for the new period, whatever was spent in the past.
Why not the others: That describes incremental budgeting. That describes a top-down approach and is not specific to zero-based budgeting. Zero-based budgets cover all areas, not just cash.
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