A problem with participative budgeting is that there will always be a tendency for those participating to build slack into the budget to ensure a better outcome for their performance assessment.

Question

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Participative budgeting involves input from various employees or departments within an organization. However, since these individuals often have their own goals and incentives, they may be tempted to overestimate expenses or underestimate revenues in order to make their department look better. This can lead to the creation of slack in the budget, which can result in a budget that is not as effective as it could be.

A Problem with Participative Budgeting Is That There Will Always