Question

A __________ budget solves the allocation rollover problem by approaching each new budget period as if it were brand new.

a. Zero-based
b. Incremental
c. Flexible
d. Static

Answer 1

A zero-based budget requires justification for each line item in each new period, preventing automatic rollover of funds and ensuring efficient allocation.

Step-by-step explanation:

A zero-based budget solves the allocation rollover problem by approaching each new budget period as if it were brand new. In zero-based budgeting, all expenses must be justified and approved for each new period. Unlike incremental budgeting, which adjusts the previous period's budget to account for inflation or other factors, zero-based budgeting starts from a 'zero base' and is re-evaluated thoroughly, requiring justification for every line item. This method can be more time-consuming but ensures that funds are allocated efficiently and prevents automatic rollover of funds.