Question

Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as:

Answer 1

Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as budget slack.

A budgetary cushion known as "budgetary slack" aims to increase the likelihood that actual performance will exceed expectations. Underestimating the quantity of revenue or income to be generated or overestimating the number of expenses to be incurred are the two ways to create budgetary slack.

The intentional under- or over-estimation of expected revenue or expenses is known as budgetary slack. This gives managers a considerably better opportunity to "make their numbers," which is crucial for them if performance reviews and bonuses are dependent on meeting budgetary targets.

Learn more about budgetary slack here

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