All 34 The Budgeting Process questions
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What is the principal budget factor (limiting factor)? What is budgetary slack and why does it matter? What is the typical sequence of steps in preparing a budget? What are the criticisms and limitations of traditional 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? What is the budget timetable and why is it important? How does benchmarking support budgeting? How is a not-for-profit or public sector budget different?
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What is incremental budgeting?

Intermediate

Answer

Incremental budgeting sets the new budget by taking the previous period's figures and adjusting them for expected changes (e.g., inflation, volume). It's simple, quick, and stable, but perpetuates past inefficiencies, embeds slack, and doesn't challenge whether spending is still justified—contrasting with zero-based budgeting.
Last year costs 500 + 4% inflation = 520 budget.
Real-world example Each department's budget is last year's plus a few percent, without re-examining the underlying activities.

Common follow-ups: What are the weaknesses of incremental budgeting? | How does ZBB differ?

Zero-Based Budgeting Types of Budgets The Budgeting Process
All 34 The Budgeting Process questions