Business Studies Multiple Choice Question – 27 May 2023

The City Council of Stafford decided to use a zero-based budgeting system for the first time for the financial year 2021–2022.

Zero-based budgeting is most likely to be …….?

Select ONE answer:

1. efficient in allocating resources
2. a quick method of budgeting
3. produced by an accountant
4. based on previous data

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Definition of zero-based budgeting e.g. a method of budgeting in which all expenses must be justified for each new period by the manager. Managers must bid and justify their budgets. This forces managers to examine all their costs for the current year, which should lead to a more efficient allocation of resources.
2. Not correct – because zero-based budgeting can be very time consuming to examine every cost each year rather than basing it on previous budgets.
3. Not correct – because zero-based budgeting is produced by individual managers of each department not by an accountant.
4. Not correct – because zero-based budgeting does not use any historical data which is used in historical based budgeting.

This work is licensed under a Creative Commons Attribution 4.0 International License.