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fruits fruits
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A week ago
What is budgetary slack and why is it an issue in budget preparation?
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Managerial Accounting


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sherry94sherry94
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Budgetary slack, or budgetary padding, is a common problem in a bottom-up budget environment. Budgetary slack is created when managers budget a lower level of revenue or a higher level of costs than is really expected to occur. At the end of the year, the manager will "beat the budget" and look as if the manager did a great job managing her department.
Budgetary slack may appear to be harmless, but there are real consequences to the organization. Resources may not be allocated in the optimal way. Managers may receive bonuses based on their beating a padded budget, so they receive additional compensation that they would not have earned had the budget been prepared realistically.

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