An extensive literature on the behavioural aspects of budgeting discusses the propensity of managers to create budgetary slack.Based on the above statement, explain three ways in which managers may attempt to create budgetary slack and how senior mana

Budgetary slack or sometimes it is referring to budgetary bias, is a common process where implementer intentionally underestimates revenue or overestimates expenses in the tight budget. Managers may attempt to create budgetary slack in three ways.

Managers may deliberately underestimate the production or sales budget¡¯s potential. For example, the sales budget for the month of July is RM 1 million. If the manager is able to achieve the target budget then the sales budget for the following month will be increases to RM 1.5 million. Manager creates budgetary slack by undervalue the budget so that the budget for August will be easier to achieve although they are able to hit the tight budget.

Manager may also attempt to achieve slack by cost overestimation. They purposely used more than the budgeted expenditure so that the budget will be increases for the following months. After that they spend less than the budgets to shows that they have improve in their performance. For instance...