To avoid problems of budgetary slack,some companies use budgets primarily to plan and other companies use it to a lesser extent in performance evaluations.

Question

Quizplus · Accepted Answer

Budgetary slack refers to intentionally overestimating expenses or underestimating revenues in a budget in order to create a cushion or buffer. By using the budget primarily for planning purposes and not placing heavy emphasis on it in performance evaluations, companies can reduce the incentive for managers to engage in budgetary slack. Therefore, the statement is true.

To Avoid Problems of Budgetary Slack,some Companies Use Budgets Primarily