If a Manager Builds Slack into a Budget, How Would

question 40

Multiple Choice

If a manager builds slack into a budget, how would that manager handle estimates of revenues and expenses?

• A)Revenues: Underestimate, Expenses: Underestimate
• B)Revenues: Underestimate, Expenses: Overestimate
• C)Revenues: Overestimate, Expenses: Underestimate
• D)Revenues: Overestimate, Expenses: Overestimate
• E)Revenues: Estimate correctly, Expenses: Estimate correctly

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Definitions:

Extraordinary Item

Events or transactions that are distinct from the ordinary activities of a company, which are unusual in nature and infrequent in occurrence.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a specific period of time.

Unusual In Nature

Events or transactions that are not typical of the normal activities of the entity and thus not expected to recur frequently or regularly.

Pro Forma Earnings

Financial results excluding one-time events to give investors an idea of a company's normal earnings potential.