If a manager builds slack into a budget, how would that manager handle estimates of revenues and expenses? Revenues Expenses A. Underestimate Underestimate B. Underestimate Overestimate C. Overestimate Underestimate D. Overestimate Overestimate E. Estimate Correctly Estimate Correctly

A budget slack is a monetary difference in favor of the company planned and created by management to ensure the firm's performance will hit the projected budget. Budget slacks are created when managers overestimate their revenues and expenses. Though, in the long term, this type of practice will only show mediocrity in the business that could be reflected in the stock price of the organization.

Parrain Parrain · Answer 2 · 2021-12-07T12:28:14+01:00

When a manager includes slack into a budget, they would B. Underestimate (Revenue) and Overestimate (expenses)

Budget slack is:

A cushion in the budget that is created to make actual performance better than planned.
Created by underestimating revenue or overestimating expenses

When revenue is underestimated, it means that when the actual revenue is larger, there will be slack. The same goes for expenses being overestimated such that when they are less than planned, slack is again created.

In conclusion, slack is created when revenues are underestimated and expenses overestimated.

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