In Zero-Based Budgeting (ZBB), managers must:
AIncrease last year's budget figures by a fixed inflation percentage
BJustify every single line-item expense from a baseline of zero for each new period
CFocus solely on capital asset investments
DBudget only for fixed overhead costs
Explanation
Core Concept: Zero-Based Budgeting mandates that every operation/expense be re-evaluated and justified from scratch (zero base) during each budget cycle, rather than making incremental adjustments. Context/Distractors: Option A describes traditional incremental budgeting. Exam Tip/Key Fact: ZBB prevents inefficient spending carried over from historical budget allocations.
Exam Relevance
- Topic: Cost Accounting
- Subtopic: Budgeting Methods
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