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What is a revenue center? What is the role of the budget committee? What is a budget manual? What is the principal budget factor (limiting factor)? What is the typical sequence of steps in preparing a budget? What are the criticisms and limitations of traditional budgeting? What is incremental budgeting? What assumptions must be agreed before budgeting starts? What is a responsibility center and what types exist? How do you set challenging but achievable budget targets?
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What is budgetary slack and why does it matter?

Intermediate

Answer

Budgetary slack is deliberately understating revenues or overstating costs when setting a budget to make targets easier to achieve. It arises especially in participative budgeting. It matters because it wastes resources, distorts planning and performance measurement, and can hide inefficiency; controls include review, benchmarking, and linking rewards carefully.
Real-world example A manager pads the expense budget by 15% to ensure they comfortably beat it and earn a bonus.

Common follow-ups: Which budgeting style encourages slack? | How can slack be controlled?

The Budgeting Process Zero-Based Budgeting Variance Analysis
All 34 The Budgeting Process questions