Budgetary slack is the amount by which a company's actual performance falls short of its budgeted or planned performance. It is usually expressed as a percentage of budgeted or planned costs.
Budgetary slack can arise for a number of reasons, including poor planning, unrealistic budgeting, and deliberate under-performance. In some cases, it may be used as a tool to help a company meet its financial targets. For example, a company may deliberately under-budget for certain expenses in order to create a cushion that can be used to offset unexpected costs.
Budgetary slack can also be a source of conflict between managers and shareholders. For example, shareholders may be concerned that managers are using budgetary slack to justify poor performance. Conversely, managers may view budgetary slack as a necessary tool for achieving financial goals.
In general, budgetary slack is considered to be a negative thing because it can lead to inefficiency and waste. However, it can also be used as a tool to help a company meet its financial targets.
What is fixed budget ACCA?
The fixed budget is an accounting tool used to predict and track income and expenses over a set period of time. The budget is created by taking into account past data, current trends, and future projections. The fixed budget is used to set financial goals and track progress towards those goals.
What are the 7 steps to budgeting?
1. Determine your financial goals.
2. Figure out your current financial situation.
3. Make a list of your income and expenses.
4. Find areas where you can cut back on expenses.
5. Create a budget that allocates your money towards your goals.
6. Stick to your budget.
7. Periodically review and adjust your budget as necessary. What is a static budget? A static budget is a budget in which all variables are held constant. This type of budget is typically used in businesses to predict future income and expenses, and to make financial decisions accordingly. Static budgets can be helpful in planning for the future, but they can also be inflexible and may not accurately reflect real-world conditions.
What are the types of budgeting?
There are several types of budgeting, each of which has its own advantages and disadvantages. The most common types of budgeting are:
1. Zero-based budgeting:
Zero-based budgeting (ZBB) is a type of budgeting in which all expenses must be justified for each new period. ZBB is often used by businesses in order to cut costs and improve efficiency.
2. Activity-based budgeting:
Activity-based budgeting (ABB) is a type of budgeting that allocates resources based on activities rather than on departments or programs. ABB is often used in manufacturing businesses in order to better understand and control costs.
3. Incremental budgeting:
Incremental budgeting is a type of budgeting in which the budget for each new period is based on the budget from the previous period, with small modifications. Incremental budgeting is often used in organizations where there is little change from one period to the next.
4. Line-item budgeting:
Line-item budgeting is a type of budgeting in which each expense is enumerated in a separate line item. Line-item budgeting is often used in government organizations, where each expense must be justified.
5. Program budgeting:
Program budgeting is a type of budgeting in which resources are allocated to programs rather than to individual activities. Program budgeting is often used in large organizations in order to better control costs.
What is budgetary bias? Budgetary bias is a general term that refers to the tendency of managers to manipulate budgets in order to achieve their own objectives. The term can refer to both legitimate and illegitimate manipulation.
There are a number of ways in which budgetary bias can manifest itself. One common example is known as "empire building," in which managers deliberately inflate their budgets in order to gain a larger share of the company's resources. Another example is known as "sandbagging," in which managers under-estimate their budget needs in order to make their performance look better when they come in under budget.
Budgetary bias can have a number of negative effects on a company. For one thing, it can lead to the misallocation of resources. If managers are allowed to freely manipulate their budgets, they may allocate too much money to their own pet projects and not enough to areas that are truly in need of funding. This can ultimately lead to inefficiency and poor decision-making.
In addition, budgetary bias can create tension and conflict within an organization. If managers are constantly jockeying for a larger share of the budget, it can create an environment of distrust and competition. This can lead to infighting and political maneuvering, which can distract from the real work of running the business.
Ultimately, budgetary bias is a serious problem that can have a number of negative consequences for a company. It is important for managers to be aware of the potential for bias and to take steps to avoid it.