SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a True profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-If SpandoCorp used a ________ budgeting process, it would assume that no project would receive funding for the future simply because it was funded in the past and would require each project to stand on its own merits each year to be included in a list of important projects that the firm can afford to fund.
A) zero-based
B) cost plus
C) dynamic
D) traditional

Question

Quizplus · Accepted Answer

A zero-based budgeting process involves starting from scratch each period and assuming that no project will receive funding for the future simply because it was funded in the past. Each project must stand on its own merits and be evaluated as if it were a new initiative. This approach is consistent with SpandoCorp's practice of treating each division as a separate profit-and-loss center and encourages efficient and effective allocation of resources.

SpandoCorp Is a Diversified Firm That Makes Industrial, Military and Consumer