ExpertMedium2 marksMultiple Choice
ACCA · Question 15 · Budgeting
Section A
NationalGrid Utilities is transitioning from incremental budgeting to Zero-Based Budgeting (ZBB) for its maintenance departments. Which TWO of the following are recognized advantages of implementing ZBB in this context?
Section A
NationalGrid Utilities is transitioning from incremental budgeting to Zero-Based Budgeting (ZBB) for its maintenance departments. Which TWO of the following are recognized advantages of implementing ZBB in this context?
Answer options:
A.
It is less time-consuming and cheaper to implement than incremental budgeting.
B.
It eliminates past inefficiencies being carried forward.
C.
It encourages a questioning attitude and fosters innovation.
D.
It requires minimal management skills and training to execute.
How to approach this question
Identify the core philosophy of ZBB: starting from zero and justifying everything. This removes old slack but takes a lot of effort.
Full Answer
Zero-Based Budgeting (ZBB) requires all expenses to be justified for each new period. This eliminates historical inefficiencies (slack) and forces managers to think critically about their operations. However, it is highly time-consuming and requires significant management training.
Common mistakes
Selecting A, assuming 'zero-based' means it's simple or quick.
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