A Boreal Bikes dealer manager, evaluated on results against budget, forecasts 900 bikes when 1,100 is realistic. This behaviour is called:
A Boreal Bikes dealer manager, evaluated on results against budget, forecasts 900 bikes when 1,100 is realistic. This behaviour is called:
Answer
Budgetary slack
Options - A. Budgetary slack - B. A stretch target set by head office - C. Management by exception - D. Zero-based budgeting Why - A. Correct — padding a participatory budget so it is easy to beat. It is the characteristic cost of bottom-up budgeting. - B. A stretch target is set ABOVE the expected level, by the company, to pull performance up. - C. Management by exception is the review discipline of looking only at large variances. - D. Zero-based budgeting justifies every line from zero; it is unrelated to a manager’s forecast.
Hermanson Vol 2 ch 23; OpenStax Accounting v2 §7.1, §7.5