Undesirable Behavior Is Especially Common in a Bottom-Up Budget Environment

question 68

Multiple Choice

Undesirable behavior is especially common in a bottom-up budget environment because

• A)managers may be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes.
• B)managers have the ability to include budgetary slack to increase his or her chances of beating the budget.
• C)managers may be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes and managers have the ability to include budgetary slack to increase their changes of beating the budget.
• D)managers may not be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes and managers may not have the ability to include budgetary slack to increase their chances of beating the budget.

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Definitions:

Income from Operations

Profit generated from a company’s regular business activities, excluding non-operating income and expenses.

Fiscal Year

A one-year period used for financial reporting and budgeting, not necessarily aligning with the calendar year.

Ledger

A book or collection of accounts in which transactions are recorded, showing the changes in each account over a period of time.

Inventory

The complete list of goods and materials that a business holds, either for sale or as part of its supply chain.