Question

The top managers of Promedium Inc. are creating a master budget for the company. They require a statement of the budget goals from each of its departments to be able to make an appropriate master budget. Karren, the manager of the sales department, overstates her needs in the budget and presents the statement to the top managers. The outcome of Karren's actions is known as _______________.

Answer 1

The correct answer is budget slack.

Step-by-step explanation:

Budget slack occurs in a company when one or more people with budgetary responsibility create a budget that overestimates expenses and / or underestimates projected income or income.

Intentional budget slack can occur because a manager feels under the weapon to "make their numbers", often in response to previous quarters where revenues fell below projections and, more importantly, did not meet expectations of the owners or shareholders.