Board of Certification for the Athletic Trainer (BOC) Practice Test

Which type of budgeting involves a fixed amount of money for specific categories?

1. Zero-based

2. Variable

3. Lump-sum

4. Line-item

The correct answer is: Lump-sum

Lump-sum budgeting refers to a method where a predetermined total amount of money is allocated for specific categories or departments within an organization. This approach offers flexibility since the management has the discretion to distribute the lump sum across various categories based on needs and priorities. It simplifies the budgeting process as opposed to itemizing every potential expense, allowing organizations to focus on overall spending limits rather than the minutiae of each line item. In contrast, other budgeting approaches may emphasize different aspects, such as zero-based budgeting, which starts from a "zero base" and involves justifying every expense anew; variable budgeting, which adjusts based on changing conditions; and line-item budgeting, which provides detailed accounts of specific expenditures. Each of these methodologies has its own applications and advantages, but lump-sum budgeting is particularly useful for managing total financial resources while allowing for internal reallocations as necessary.