Lecture Week 4 FM Pt 1-3

Which of the following best defines a centralized budgeting approach in higher education?

• A) Each department manages its own budget and contributes to a central fund for shared services.

• B) All revenues are collected into a single central pool and allocated to various departments through a centralized process.

• C) Budgets are created independently by each unit without any central oversight.

• D) Revenues from tuition are directly allocated to student scholarships only.

In a centralized budgeting approach, who is typically responsible for reviewing and allocating budget proposals to different departments?

• A) Individual department heads

• B) Student government

• C) The finance office or central authority

• D) External auditors

Which of the following is a key characteristic of a decentralized budgeting approach?

• A) All revenues are accumulated in a central fund managed by the finance office.

• B) Departments submit budget proposals to a central authority for allocation.

• C) Individual units generate and manage their own revenue, contributing to a central pool for shared services.

• D) Budget decisions are made solely based on institutional priorities set by the central office.

At University X, the College of Engineering receives tuition fees directly from its students and uses the revenue to cover salaries and equipment. Additionally, it contributes a portion to a central fund for administrative services. Which budgeting approach is University X using?

• A) Centralized Budgeting Approach

• B) Zero-Based Budgeting

• C) Decentralized Budgeting Approach

• D) Incremental Budgeting

Suppose the finance office at a university collects all revenue streams, including tuition, fees, and donations, and then allocates funds to departments based on their budget proposals and institutional priorities. If a new policy requires each department to manage its own revenue independently, which budgeting approach is being changed?

• A) Incremental Budgeting Approach

• B) Centralized Budgeting Approach

• C) Responsibility-Centered Budgeting

• D) Decentralized Budgeting Approach

What is the primary characteristic of incremental budgeting?

• A) Each expense must be justified from zero every budget cycle.

• B) The previous year’s budget is used as the starting point for the new budget.

• C) Budgets are managed independently by each department without central oversight.

• D) All revenues are pooled into a central fund before allocation.

Which of the following is an advantage of incremental budgeting?

• A) It ensures all budget items are reviewed and justified annually.

• B) It promotes the reallocation of funds to new priorities.

• C) It is easy and efficient as it focuses only on changes from the previous year.

• D) It eliminates the risk of perpetuating existing budget inefficiencies.

What is a base budget in the context of incremental budgeting?

• A) A budget that starts from zero and requires justification for all expenses.

• B) The total projected revenue for the upcoming fiscal year.

• C) The foundational budget from the prior year used as a starting point for adjustments.

• D) A supplementary budget allocated for new projects and initiatives.

Which of the following best describes a reallocation exercise?

• A) A method to increase the overall budget by a fixed percentage.

• B) A process to reassess and redistribute funds from existing budgets to new or prioritized areas.

• C) A technique to merge multiple department budgets into one central budget.

• D) An approach to eliminate unnecessary expenses by cutting the base budget.

Scenario: The Honors Program had a budget of $455,000 last year, perfectly balancing revenues and expenditures. This year, they anticipate a 2% increase in faculty salaries due to higher enrollment. Using incremental budgeting, what should the Honors Program do to prepare their budget for the upcoming year?

• A) Create a completely new budget from scratch, justifying every expense.

• B) Use the previous year's budget as the base and add $9,100 for the salary increase.

• C) Pool all revenues into a central fund and allocate based on department needs.

• D) Reduce other expenses by $9,100 to accommodate the salary increase without changing the base budget.