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Which of the following statement(s) is/are not true about incremental budgeting?(Select the correct answer from the options below the statements) (1) Incremental budgeting adjusts / considers changes in the managers' turnover rate (2) Incremental budgeting considers changes in the managers' hierarchy (3) Incremental budgeting considers changes in the cost of capital All of the above (1) only (1) and (2) None of the above

Question

Which of the following statement(s) is/are not true about incremental budgeting?(Select the correct answer
from the options below the statements)
(1) Incremental budgeting adjusts / considers changes in the managers' turnover rate
(2) Incremental budgeting considers changes in the managers' hierarchy
(3) Incremental budgeting considers changes in the cost of capital
All of the above
(1) only
(1) and (2)
None of the above

Which of the following statement(s) is/are not true about incremental budgeting?(Select the correct answer from the options below the statements) (1) Incremental budgeting adjusts / considers changes in the managers' turnover rate (2) Incremental budgeting considers changes in the managers' hierarchy (3) Incremental budgeting considers changes in the cost of capital All of the above (1) only (1) and (2) None of the above

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ReginaldElite · Tutor for 8 years

Answer

(1) and (2)

Explain

## Step1: <br />Understand the statements about incremental budgeting. Incremental budgeting typically involves a review of the previous period's budget and actual performance to identify areas for financial adjustment, either as increases or decreases. However, the changes considered typically involve changes in the organization's internal and external circumstances (including inflation, market changes, and changes in organizational strategy or objectives) rather than changes specific to managerial dynamics. <br /><br />## Step2: <br /><br />Evaluate each statement against this understanding of incremental budgeting.<br /><br />1. "Incremental budgeting adjusts / considers changes in the managers' turnover rate." <br /><br />This statement is not normally true because manager turnover does not generally play a large integrating element while crafting these types of budgets.<br /><br />2. “Incremental budgeting considers changes to managers' hierarchy.”<br /><br />Again, this statement isn't typically accurate as hierarchies are not inherent components while forming these budgets. <br /><br />3. "Incremental budgeting considers changes in cost of capital."<br /><br />This statemeent could be considered partially related to incremental budgeting. Changes in cost of capital can cause adjustment to organization's budgets. However, it's not the centermost thing in forming incremental budgets; rather it is based on adjustments from prior plans or budgets.<br /><br />## Step3: <br /><br />Compare solutions with options presented in the problem.<br /><br />Reviewing the statements and pinning them against incremental budgeting, Statements 1 and 2 do not generally hold true for incremental budgeting. Therefore, the correct answer would be "(1) and (2)".
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