Multiple Choice QuestionAll of the following are potential negative outcomes of budgeting except:Multiple choice question.understatement of sales budgets and overstatement of expense budgetsoverstatement of sales and understatement of expensesemployees may engage in unethical behavioremployees might always spend their budgeted amount even on unnecessary items
Question
Multiple Choice QuestionAll of the following are potential negative outcomes of budgeting except:Multiple choice question.understatement of sales budgets and overstatement of expense budgetsoverstatement of sales and understatement of expensesemployees may engage in unethical behavioremployees might always spend their budgeted amount even on unnecessary items
Solution
The correct answer is: "overstatement of sales and understatement of expenses". This is not a negative outcome of budgeting, but rather a potential error or manipulation in the budgeting process. The other options all describe potential negative outcomes of budgeting: understating sales budgets and overstating expense budgets can lead to unrealistic expectations and poor decision making; employees may engage in unethical behavior to meet budget targets; and employees might spend their entire budgeted amount even on unnecessary items, a phenomenon known as 'spend it or lose it'.
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