The following that does not describe a total consumption of budget is It does not allow for discretionary income. The answer is letter D. Letters A, B and C does not qualify as an answer form the question above.
What is a total consumption budget?
Total consumption budget is defined as a budget where every centavo is allocated to a planned need like shelter, food, water, etc. Thus, for a budget not to become a total consumption budget, there must be some left over amount for discretionary spending like savings and other miscellaneous expenses.
Why is consumption smooth?
Consumption smoothing allows them to control their spending so that they can meet their various obligations when income is fluctuating. As an economics concept, consumption smoothing captures the desire of people to have a stable path of consumption.
What does the budget line represent?
A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget.
What are the advantages of budget?
Benefits of a business budget
- manage your money effectively.
- allocate appropriate resources to projects.
- monitor performance.
- meet your objectives.
- improve decision-making.
- identify problems before they occur – such as the need to raise finance or cash flow difficulties.
- plan for the future.
- increase staff motivation.
Which is true of a total consumption budget?
A total consumption budget means that all the money is spent on the products and services which have already been planned, and there is nothing left over as discretionary income.
Which is the best description of zero-based budgeting?
Zero-Based Budgeting Zero-based budgeting (ZBB) is a budgeting technique that allocates funding based on efficiency and necessity rather than on budget history. Management starts with the assumption that all department budgets are zero and must be rebuilt from scratch. Managers must be able to justify every single expense.
What’s the difference between activity-based and top-down budgeting?
Activity-based budgeting Top-Down Budgeting Top-down budgeting refers to a budgeting method where senior management prepares a high-level budget for the company. The company’s senior management prepares the budget based on its objectives and then passes it on to department managers for implementation.
What happens when you overstate the size of a budget?
It is likely to result in budgetary slack. For example, a manager might overstate the size of the budget that the team actually needs so it appears that the team is always under budget. It is also likely to ignore external drivers of activity and performance. For example, there is very high inflation in certain input costs.
