Question

Budgetary slack refers to the:

use of padding to avoid unfavorable appraisals

budgeted profit margin

increasing of sales prices to cover budget deficits

none of these

"other expenses" items of the budget

Answer 1

Budgetary slack refers to the:

use of padding to avoid unfavourable appraisals

Budgetary slack or padding the budget describes the practice of underestimating budgeted revenues, or overestimating budgeted costs, to make budgeted targets more easily achievable.
a)On the positive side, budgetary slack can provide managers with a cushion against unforeseen circumstances, but Budgetary slack creates more problems than it solves. Thus the use of budgetary slack, particularly if it has a detrimental effect on the company, may be unethical.
b)The negative results of budgetary slack are that it misrepresents the true profit potential of the company and can lead to inefficient resource allocation and poor coordination of activities within the company. The planning inaccuracy spreads throughout the company.
i)For instance, if sales are planned too low, production will also be planned too low, possibly leading to product shortages; the advertising program and distribution expense budgets may be planned incorrectly; the cash budget might be inaccurate; and so forth

The best way to avoid the problems of budgetary slack is to use the budget as a planning and control tool, but not for managerial performance evaluation