Zero-Based Budgeting Refers to

question 16

Multiple Choice

Zero-based budgeting refers to

• A) a budgeting system that has very uncertain assumptions.
• B) a new budgeting system for a company that has not had a budget before.
• C) a budgeting system where all activity costs are based on estimates only.
• D) a budgeting system where all activities are initially set to zero and will not be continued unless they are clearly justified.

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Definitions:

Sales Increase

A situation where a company experiences a rise in the volume or value of its product sales over a particular period.

Operating Capacity

The maximum output a company can produce using its current resources and technology.

Pro Forma

A financial statement prepared on the basis of some assumed events and transactions that have not yet occurred.

Net Fixed Assets

The value of a company's property, plant, and equipment minus any accumulated depreciation, representing the actual value of the company's fixed assets.