Question

(1)  What is budgetary slack?

(2)  Why does budgetary slack occur?

(3) Is budgetary slack a desirable feature? Can it be prevented? Why or why not?

Answer 1

1]Budgetary slack:Budgetary slack is created in a budget by management to increase the actual performance beating the budget. This allows the managers of the company a much better chance of making the budgets for the future years 2]Budgetary slack occurs when managers intentionally under estimation of revenue or over estimation of budget expenses in order to make it easier to achieve the budgeted goals, Mangers have right to this because they can often easily compare the budgets of each year 3]Budgetary slack is not much of a desirable feature ,it has some negatives along with postives . One of the negative is that if delibaretely underestmate the sales budget might have serious consequences in planning the other activites YES, it can be prevented by taking some steps ;1]Evaluation system 2]Truth-inducing pay schme 3]Participative budget 4]Zero-based budgeting