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Budgetary slack

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Budgetary slack

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • May 25, 2019 at 9:11 am #517263
    bekzod
    Member
    • Topics: 20
    • Replies: 25
    • ☆

    Dear Sir,

    I could not clearly understand the folliwng statement:

    Kaplan Revision Kit says that: Fixed budget encourages budgetary slack, while flexed budget does not encourage budgetary slack. The thing I could not understand how can flexed budget help avoid slack?

    Thank you for your help.

    May 25, 2019 at 10:39 am #517284
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54711
    • ☆☆☆☆☆

    Budgetary slack is where they budget for expenses more that they really should be spending (so when the actual results are compared with budget it looks as though they have done well).

    Flexing the budget means that if they produce less than expected then the budgeted expense will be lower. Whereas with a fixed budget, if they produce less than expected then the budgeted expense will stay the same.

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