Challenge Your Exam Readiness With Our Free CMA Part 1 Practice Questions

Zero-based budgeting (ZBB) requires managers to build each budget from scratch, justifying every expense as if it were new, regardless of prior period levels. This approach contrasts with incremental budgeting (C), which adjusts the prior year’s budget with additions or subtractions. Option (A) is inaccurate since ZBB demands justification for both existing and new costs. Option (D) is also incorrect because ZBB considers all expenses, not just variable costs. CMA Part 1 covers ZBB as a planning tool that enhances cost control and resource allocation by forcing managers to critically evaluate spending decisions. While time-consuming, ZBB can eliminate wasteful expenditures, align resources with organizational priorities, and promote accountability. It is particularly useful in organizations facing financial constraints or seeking to optimize performance. However, its practicality may be limited in large, complex organizations due to resource intensity.