A company moves from a top-down to a bottom-up budgeting approach. Which is the most likely benefit?
Answer and explanation
Correct answer: C. Managers who help set targets are more likely to feel ownership and be motivated to achieve them
- Step 1: Bottom-up budgeting involves the managers who will run the budget.
- Step 2: Participation tends to improve commitment and the quality of information.
Answer
Managers who help set targets are more likely to feel ownership and be motivated to achieve them.
Why not the others: Bottom-up budgeting usually takes longer because many people contribute. Alignment with strategy is a strength of the top-down approach. Participation can lead to slack, and managers know costs better than the board.
Practise more Budgeting and forecasting.
Free questions with an explanation for every one, and full timed ICAEW ACA Certificate Level mock tests.
More Budgeting and forecasting questions
- A business recorded total costs of £42,000 at 3,000 units and £54,000 at 5,000 units. Using the high-low method, what is the predicted total…
- Quarterly sales for four consecutive quarters were £96,000, £120,000, £114,000 and £130,000. Using a three-quarter moving average, what is t…
- Ice cream sales and the number of sunburn cases both rise in the summer months. What is the correct conclusion?
- What is the main feature of zero-based budgeting?
- A business sells on credit. 30% of customers pay in the month of sale and the remaining 70% pay in the following month. Sales were £100,000…
- Budgeted sales are 5,000 units. Opening inventory is 400 units and the target closing inventory is 600 units. How many units must be produce…