What is Participative Budgeting?

Participative budgeting involves lower-level individuals in the budgeting process, contrasting with imposed budgeting where top management sets the budget. This approach fosters ownership and motivation, leading to more achievable budgets due to the input from those with firsthand knowledge of operations. However, it is time-consuming and may lead to budgetary slack, where individuals request more resources and set lower targets to ensure they meet objectives.

What is a key characteristic of participative budgeting?

• It is the same as imposed budgeting.

• It includes individuals at lower levels in the organization.

• It excludes front-line managers.

• It involves only top-level management.

How does participative budgeting affect employee motivation?

• It decreases motivation by excluding employees.

• It increases motivation by providing a sense of ownership.

• It has no effect on motivation.

• It demotivates employees by setting unrealistic goals.

Why is participative budgeting considered effective in identifying achievable budgets?

• It ignores input from lower-level employees.

• It involves individuals with firsthand knowledge of operations.

• It sets arbitrary financial targets.

• It relies solely on historical data.

What is a drawback of participative budgeting?

• It can lead to budgetary slack.

• It excludes employee input.

• It is a quick process.

• It is less motivating for employees.

What is budgetary slack?

• Requesting more resources and setting lower targets.

• Asking for fewer resources than needed.

• Ignoring the budgeting process altogether.

• Setting higher targets to challenge employees.