Which question about strategy must be answered when using zero-based budgeting?

Which question about strategy must be answered when using zero-based budgeting?

• A. Have there been any significant strategy changes that should cause a reallocation of budgeted funds?
• B. What is the minimum acceptable return on investment?
• C. Which departments should be cut first based on last year's ratios?
• D. What is the required level of inventory safety stock?

Answer: (A)

Zero-based budgeting starts from a clean slate each period, requiring justification for every dollar in terms of current objectives. Because plans and priorities can shift, the key strategic question is whether there have been significant strategy changes that would require reallocating funds to new or different activities. If strategy has changed, resources must be redirected to support those new priorities rather than simply carrying over last year’s spend. The other options focus on past performance, routine thresholds, or operational details, which don’t directly drive the strategic reallocation that ZBB requires.

Zero-based budgeting starts from a clean slate each period, requiring justification for every dollar in terms of current objectives. Because plans and priorities can shift, the key strategic question is whether there have been significant strategy changes that would require reallocating funds to new or different activities. If strategy has changed, resources must be redirected to support those new priorities rather than simply carrying over last year’s spend. The other options focus on past performance, routine thresholds, or operational details, which don’t directly drive the strategic reallocation that ZBB requires.