The production manager at ABC Inc.is responsible for formulating the budget for his department.He will be evaluated on his ability to control costs.After considerable thought, he arrives at his best estimate of costs, and then adds a further 10% to the projections.Chances are he has inflated the cost projections because

Question

Quizplus · Accepted Answer

By overestimating expenses, the production manager can have room for unexpected expenses and can easily come in under budget, which will result in a favourable evaluation. This is an example of padding the budget. Conservative accounting practice requires that expenses be reported accurately, so option B is not applicable. Option A is also not applicable as just following an old practice without any justification is not professional.

The Production Manager at ABC Inc