Zero Based Budgeting Requires Managers to Justify Budgeted Expenditure as If

question 18

True/False

Zero based budgeting requires managers to justify budgeted expenditure as if no information about budgets or costs from prior budget cycles was available.

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Definitions:

Sales Volume

This refers to the total number of units of a product or service sold over a specific period.

Account Analysis

A method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst’s prior knowledge of how the cost in the account behaves.

Mixed Cost

An expense that contains both fixed and variable components, changing in total with the level of activity though containing a constant element.

Fixed Cost

Expenses that do not change in total with changes in the level of output or activity within a certain range.