A hospital's budget is incremental. Which statement by the nurse manager reflects use of this type of budget? Note: Credit will be given only if all correct choices and no incorrect choices are selected. Select all that apply.
A) "The finance department sent me the budget worksheet with last year's expenses."
B) "We have $1,000 left in our education account that we need to spend before the year is over. Who has an idea for a class to attend?"
C) "I have to justify all our activities as if we have never done them before."
D) "I like this type of budget preparation because it is fairly simple and straightforward."
E) "In order to create next year's budget, I am to start at 80% of what we budgeted last year."

Question

Quizplus · Accepted Answer

1. Developing an incremental budget may begin with documentation of the previous year's actual expenses.
2. The disadvantage of an incremental budget is that managers quickly learn to spend all that is in their budget for a specific line item. If budgets are based on the previous year's performance, having budgeted money left over means it is likely that the current year's budget will be cut.
3. Justification of all activities and expenditures is a characteristic of a zero-based budget.
4. Incremental or line-item budgeting is fairly simple and straightforward.
5. Starting with a decreased budget is a form of zero-based budget.

A Hospital's Budget Is Incremental