Question

In zero-based budgeting, adjustments are made to the previous period budget to account for slight changes in an organization.

a) Incremental
b) Fixed
c) Zero-based
d) Variable

Answer 1

In zero-based budgeting, adjustments are made to the previous period's budget to account for slight changes in an organization. It requires that every item in the budget be justified and evaluated from scratch. The correct option is

c) Zero-based.

Step-by-step explanation:

In zero-based budgeting, adjustments are made to the previous period's budget to account for slight changes in an organization. This is different from incremental budgeting, where adjustments are made to the budget based on a percentage increase or decrease from the previous period. Zero-based budgeting requires that every item in the budget be justified and evaluated from scratch, rather than simply assuming the previous year's budget is appropriate.

For example, let's say an organization had a budget of $10,000 for office supplies in the previous period, but due to changes in the market and technology, they need to implement new software that will require additional expenses. In zero-based budgeting, they would re-evaluate the office supplies budget and determine the necessary adjustments to accommodate the new software and its associated costs.

Therefore, the correct answer is c) Zero-based.