Which of the following is true of participative budgeting?
A) It always reflects operating realities such as actual levels of activity and seasonal variances.
B) It gives an opportunity to build slack into the budgets.
C) It results in achieving maximum organizational efficiency.
D) It is only in use by large firms that need to prepare cash budgets.
E) It can only be used by small firms.

Question

Quizplus · Accepted Answer

Participative budgeting involves the participation of many levels of management in the budget preparation process. This approach can lead to the inclusion of budgetary slack, as managers may overestimate expenses or underestimate revenues to create a cushion that makes it easier to achieve budget targets.

Which of the Following Is True of Participative Budgeting