What is a major disadvantage of an incremental budget?

• A. It allows for significant changes in strategy easily
• B. It ignores last period's data entirely
• C. It requires the assumption that this period is very similar to last period
• D. It is always faster than zero-based budgeting

Answer: (C)

Incremental budgeting uses the previous period as the base and makes only small adjustments for the next period. The main drawback is that it assumes this period will be very similar to last period. When conditions change—such as shifts in demand, new programs, or emerging costs—the budget tends to carry forward the old patterns instead of rethinking needs or reallocating resources. This makes the approach less responsive to change and can perpetuate inefficiencies or outdated spending.

The other ideas don’t fit as well: it doesn’t allow significant changes easily, because adjustments are minor rather than revolutionary; it does rely on last period’s data as the starting point rather than ignoring it; and while it’s generally faster to prepare than zero-based budgeting, it isn’t guaranteed to be faster in all cases.