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Greetings sir.
In 11.1,
What does the 4th option mean (regarding budgetary slack) ? Could you please elaborate ? And why can it not be the correct answer?
Thankyou.
Slack is when the people preparing the budget deliberately budget for more than they expect to need to spend. It then makes it easier for them to ‘beat budget’ and appear to be doing well.
It is always a problem with budgets, but letting staff participate in the preparation does not make it a bigger problem – even if staff did not participate and only the senior manager prepared the budgets, then it can still happen.
I dont know, in the Kaplan Study text, they mentioned budgeting bias as the main disadvantage highlight of the bottom up approach. So that is why I selected this. I do observe that at times BPP conflicts with Kaplan answers, especially in theory sections. I especially noticed this when I was studying F4 English Law paper.
Anyways, thankyou sir for the response.
But budgeting bias is not an option given in the BPP question – it is not the same as slack.
The MA Kaplan text states on Pg347,
“Budgetary bias is where a manager deliberately sets a lower revenue target or a higher cost target
The effects of this sort of bias can be minimized by careful control at the budget setting stage and by monitoring the budget from one year to the next”.
Isn’t this the same definition you gave for slack in different words, sir ?
What you quote from Kaplan is correct and I was wrong.
However, my first reply to your question still applies – the fact that it can be built in by managers as well as by staff does not make it a limitation just to participation by staff.
I guess Kaplan just mentioned about (lower level) managers doing slack/ budgetary bias as the problem if allowed in the participation process.
But in the BPP mcq, senior manager has been added to the slack cause, thus reducing the weight of the option as an answer for the problem of bottom up approach.
The only other negative answer remained the correct answer, being ignored leading to de-motivation.
Thankyou and appreciate your feedback, sir.
Regards.
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