Under zero-based budgeting, the budget for virtually every activity in the firm is initially set to zero and each activity must be justified in terms of its continued usefulness in order to receive funding during the budgetary process.

Question

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Zero-based budgeting requires that all expenses must be justified for each new period, starting from a "zero base," with every function within an organization being analyzed for its needs and costs.

Under Zero-Based Budgeting, the Budget for Virtually Every Activity in the Firm