ExpertMedium2 marksMultiple Choice
ACCA · Question 20 · Budgeting
An NGO is transitioning from incremental budgeting to zero-based budgeting (ZBB) for its community outreach programs.
Which TWO of the following are distinct advantages of zero-based budgeting in this context?
An NGO is transitioning from incremental budgeting to zero-based budgeting (ZBB) for its community outreach programs.
Which TWO of the following are distinct advantages of zero-based budgeting in this context?
Answer options:
A.
It is less time-consuming than incremental budgeting.
B.
It forces managers to justify every dollar of expenditure from scratch.
C.
It automatically adjusts last year's budget for inflation.
D.
It helps identify and eliminate inefficient or obsolete programs.
How to approach this question
Recall the definition of ZBB: starting from a 'zero base' and justifying all costs. This eliminates waste but takes a lot of time.
Full Answer
Zero-based budgeting requires all expenses to be justified for each new period, starting from a base of zero. This prevents the carry-over of past inefficiencies and forces a review of all programs. However, it is highly time-consuming.
Common mistakes
Selecting option A, assuming a new system is always faster.
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