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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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Which of the following is not an advantage of participative budgeting?

  1. a. It encourages budgetary slack.
  2. b. It tends to lead to a higher level of performance.
  3. c. It fosters a sense of responsibility.
  4. d. It encourages greater goal congruence.
  5. e. It fosters a sense of creativity in managers.

To determine

Identify the option which is not an advantage of participative budgeting.

Explanation

Participative Budgeting:

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

a.

In participative budgeting, managers that are responsible to comply with budgets take part in preparation, which enables them to introduce budgetary slacks. Budgetary slacks are introduced to make budgets comparatively easier to achieve by increasing expenses and reducing incomes. This is a disadvantage of participative budgeting. Therefore, this is the correct option.

b.

In participative budgeting, subordinate managers suggest potential problems and issues that are faced during operations. This helps in preparation of reasonable and achievable budgets which in turn enables them to provide a higher level of performance...

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