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)Both that managers may be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes and that managers have the ability to include budgetary slack to increase his or her chances of beating the budget.
D)Neither that managers may be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes nor that managers have the ability to include budgetary slack to increase his or her chances of beating the budget.

Question

Quizplus · Accepted Answer

In a bottom-up budget environment, managers are typically responsible for preparing their own departmental budgets. This gives them the ability to include budgetary slack, meaning they intentionally overestimate expenses or underestimate revenues, to increase the likelihood of meeting or beating their budget targets. However, if they do not meet their targets, they may be required to explain unfavorable outcomes to upper management, even if they were not in control of the factors that caused the outcomes. Thus, both A and B are factors contributing to undesirable behavior in a bottom-up budget environment.

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