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 decides to use the method of allocating capital where each project receives funding on its merit and not because it received funding the previous year, it is using
A) zero-based budgeting.
B) corporate budgeting.
C) centralized budgeting
D) coordinated budgeting.

Question

Quizplus · Accepted Answer

Zero-based budgeting is a method of allocating capital where each project receives funding based on its merit, without any consideration given to previous years' allocations. This approach helps ensure that resources are allocated efficiently and effectively based on current market conditions and competitive pressures. In this case, SpandoCorp treats each business as a separate profit-and-loss center, which further supports the use of zero-based budgeting to allow each division to make strategic decisions about its funding needs. Therefore, A) zero-based budgeting is the best choice.

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