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SSC Financial and Cost Accounting P-1 QUESTION #1208
Question 1
Zero-based budgeting (ZBB) requires managers to:
  • Justify only incremental changes in budgeted amounts.
  • Prepare budgets based on historical costs.
  • Justify all budgeted expenditures from scratch.✔️
  • Ignore past costs entirely.
Correct Answer Explanation
Zero-based budgeting (ZBB) requires that every budget item be re-evaluated and justified from zero each budget period, regardless of previous spending. Managers must build their budget from scratch by justifying all proposed expenditures, not just changes from the prior year. This contrasts with incremental budgeting which adjusts last year's figures.