Question

Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process?

A) To benefit from their experience with the day-to-day aspects of running the business.
B) To reduce the time and cost expended in the budgeting process.
C) To ensure that they do not introduce any budgetary slack.
D) To ensure that the budgets are administered rigidly given the changing market conditions.

Answer 1

One reason why top managers want lower-level managers to participate in the budgeting process is to ensure that they do not introduce any budgetary slack.

Step-by-step explanation:

One reason why top managers want lower-level managers to participate in the budgeting process is to ensure that they do not introduce any budgetary slack. Budgetary slack refers to intentionally underestimating revenues or overestimating expenses in order to create a cushion or buffer. By involving lower-level managers in the budgeting process and having them provide input, top managers can help minimize the likelihood of budgetary slack and ensure more accurate budgeting.

For example, if lower-level managers are responsible for creating their own budgets, they may have a better understanding of the actual costs and expenses involved in their department. This firsthand knowledge can help them provide more accurate estimates and prevent the introduction of budgetary slack.