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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Explain why a manager has an incentive to build slack into the budget.

To determine

Explain the reasons due to which managers has an incentive to build slack into the budget.

Explanation

Participative Budgeting:

Participative budgeting is a technique in which budgets are prepared by the managers with the participation of their subordinates. In participative budgeting, objectives are communicated, based on which budgets are prepared by the subordinate managers.

Budgetary slacks are introduced to budgets to make them comparatively easier to achieve by increasing expenses and reducing incomes.

In participative budgeting subordinate managers that are responsible to comply with the budgets, participate in the preparation of budgets...

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