Listed below are several terms related to budgeting.

Top-down budgets Participatory budgets Incremental budgets Zero-based budgets Flexible budget Static budget For each of the situations below, identify which budgeting term is involved:

A. In our company, we don’t trust the department managers to set their own budgets. The CEO sets the budget targets for all departments.

B. When the new governor took office, he said he thought that over time the state government had become too big, and was filled with unnecessary programs. He made every department justify every penny of its spending, and each department had to explain what its role was and why it was needed.

C. In our company, we realize that cost budgets have to change when there is a change in customer demand.

D. In our company, we see it as too time-consuming to write up reasons every year for every project. Things just don’t change that much, so we only ask departments to explain why this year’s budget request is different from last year’s.

E. Our CEO is a financial guy, and doesn’t really know the nuts and bolts of the business. He asks the people who are close to production, and close to the customers, to take the first crack at the budget.