Which of the following is a major disadvantage of Zero-Based Budgeting?

Zero-Based Budgeting (ZBB) requires each department to justify its budget from scratch for each new period, rather than basing it on historical expenditures. One major disadvantage of this approach is that it can lead to unnecessary reviews of budget items, which can be time-consuming and resource-intensive. Each budget cycle necessitates comprehensive justifications for expenditures that may not have changed significantly, leading to operational inefficiencies. This exhaustive evaluation process may consume valuable time and resources, diverting attention from strategic initiatives that could drive organizational value.

This characteristic is particularly problematic for organizations that already possess established, effective programs that are worth funding without inundating the decision-makers with justification paperwork for each line item. In contrast, other budgeting methods may allow for a quicker allocation based on past spending or established programs, potentially fostering a more agile financial management approach.