Ron Benson is a new production manager. After a great deal of effort, including considerable market research, he completes his budget and submits it to his boss, Diane Moran. Without even looking at it, she asks him what his “fudge factor” was, and which items contained the most slack. Ron, very surprised, responds that he doesn’t use any “fudge factor,” and that all his figures are honest. Ms. Moran counters by asking him how he would respond if he had to cut about 20% from his budget, as it is. She tells him that most budgets are trimmed in committee, and he had better be ready. She returns the budget to him, and tells him to come back with something reasonable.
Should Ms. Moran refuse to accept a budget without slack? Should building in slack be an accepted budgeting practice? Explain.