Budgetary slack — OpenTuition Forums

BBekzod7y ago

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.

John MoffatTutor7y ago#1

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.