Which of the following is a benefit of participative budgeting?
A. Budget planning is highly centralized.
B. A twelve-month planning horizon is maintained at all times.
C. Employees tend to be more motivated to achieve the budget.
D. Communication is clearer because it flows in only one direction – upward.
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The benefit of participative budgeting is that C. Employees tend to be more motivated to achieve the budget. Participative budgeting involves including employees in the budgeting process, allowing them to contribute their input and ideas. This involvement makes employees feel more engaged and motivated to achieve the budget because they have actively participated in its creation.
The correct answer is C. Employees tend to be more motivated to achieve the budget.
Participative budgeting is a budgeting approach that involves input and involvement from various levels of employees within an organization. This means that employees have the opportunity to contribute their ideas and perspectives in the budgeting process.
To arrive at the correct answer, we can analyze the options given:
A. Budget planning is highly centralized: This statement suggests that the decision-making authority for budget planning is concentrated in a central body or management. It does not necessarily relate to the benefits of participative budgeting.
B. A twelve-month planning horizon is maintained at all times: This statement refers to the planning time frame for budgeting. It does not specifically relate to the benefits of participative budgeting.
C. Employees tend to be more motivated to achieve the budget: This statement highlights one of the key benefits of participative budgeting. When employees are involved in the budgeting process, they feel a sense of ownership and are more likely to be motivated to achieve the budget goals.
D. Communication is clearer because it flows in only one direction – upward: This statement describes a one-way communication flow from lower-level employees to higher-level management. While this may result from participative budgeting, it does not explicitly mention the benefits of participative budgeting.
Therefore, the correct answer is C. Employees tend to be more motivated to achieve the budget. This suggests that involving employees in the budgeting process can lead to increased motivation and commitment, which can ultimately contribute to better budget performance.