Which is a characteristic of zero-based budgeting (ZBB)?

Zero-based budgeting (ZBB) is a budgeting approach where all expenses must be justified for each new period, rather than being based on the previous year's budget. This means that every department starts with a "zero base" and must provide a rationale for every cost, rather than simply carrying forward previous allocations. By requiring all cost element justifications from scratch, ZBB encourages departments to focus on their needs and priorities each budgeting cycle, which can lead to more efficient allocation of resources and better alignment with organizational goals.

This characteristic distinguishes ZBB from traditional budgeting methods that often assume prior budgets as a baseline. In ZBB, the focus is on justifying all expenditures, leading to potentially more informed decision-making about resource allocation while eliminating budgetary "slack" that may exist in historical budgets.