Question

Q16-1: Zero based budgeting is a technique where a department: Question options:

.the difference between budget and actual results will be zero

.prepares a budget after taking into account current expenditure and an allowance for the next period’s expenditure

.is required to make a case for its budget as if its activities were new

.prepares budgets on the basis of no increase in unit costs from the previous period.

Answer 1

Correct answer-----is required to make a case for its budget as if its activities were new

.

A zero based budget does not consider previous period’s cost as a basis rather it analysis every cost to see whether that cost is justified or not, If there is any need for improvement then its done by the management.

Basically zero based budget starts analyzing all expenses from the beginning and we can also say that zero budgeting requires managers to make a case of budget as if activity is new.