Juwan is updating the budget for Pittman's Cycle Shop. His manager has told him that a new piece of equipment has been purchased with a monthly loan payment of $123.50 for the next six months. Juwan adds the new payment to the budget and returns the budget to his boss, Laura. Laura tells him that he cannot just add the new expense, but that instead he needs to review/adjust budgeted amounts in each category so that the inflow minus the outflow equal zero. Juwan updates the budget and sends it to Laura. Laura adds an additional 15% to each category before submitting the budget to finance. This an example of a(n)
A) imposed budget using the use-it-or-lose-it method.
B) participative budget using slack.
C) rolling budget using the use-it-or-lose-it method.
D) zero-based budget using slack.

Question

Quizplus · Accepted Answer

To create a zero-based budget, the revenues and expenses must be reviewed to ensure that the revenues minus the expenses will equal zero, and increasing the budget amount above what is genuinely thought to be needed in order to make it easier to meet goals is called adding slack.

Juwan Is Updating the Budget for Pittman's Cycle Shop