ExpertEasy2 marksMultiple Choice
ACCA · Question 18 · Syllabus D: Budgeting
A public health department is switching from incremental budgeting to Zero-Based Budgeting (ZBB) for its community outreach programs.
Which of the following is a primary advantage of Zero-Based Budgeting in this context?
A public health department is switching from incremental budgeting to Zero-Based Budgeting (ZBB) for its community outreach programs.
Which of the following is a primary advantage of Zero-Based Budgeting in this context?
Answer options:
A.
It is much faster and cheaper to implement than incremental budgeting.
B.
It forces managers to justify every dollar of expenditure, eliminating obsolete programs.
C.
It automatically adjusts budgets for inflation based on the previous year's spend.
D.
It relies heavily on historical data, making forecasting highly accurate.
How to approach this question
Understand the definition of ZBB: starting from zero and justifying all costs. This eliminates inefficiencies but takes a lot of time.
Full Answer
B.It forces managers to justify every dollar of expenditure, eliminating obsolete programs.✓ Correct
Zero-Based Budgeting (ZBB) requires managers to build their budgets from zero, justifying every proposed expenditure based on its current value and necessity, rather than just adding a percentage to last year's budget. This is excellent for public sector/NGOs to weed out inefficiencies and obsolete programs, though it is very time-consuming.
Common mistakes
Assuming ZBB is a quick or easy process.
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