Final answer:
The correct answer is True. Budgeting slack is more likely when budgets are used solely for planning and not for control, as there's less scrutiny, making the statement TRUE.
Step-by-step explanation:
Budgeting slack is a scenario where managers intentionally underestimate revenues or overestimate costs as they prepare a budget, creating an unofficial buffer. The statement that budgeting slack is most likely to occur when a firm uses the budget only as a planning device and not for control is TRUE.
This is because when a budget is not used for control, managers may feel they have more leeway to incorporate slack without facing any repercussions for not meeting tighter budgetary goals.
On the other hand, when budgets are used for control, there is often greater scrutiny and comparison of budgeted figures with actual performance, which can discourage the creation of slack. Therefore, the use of budgets for control purposes acts as a deterrent against the padding of budgets.