ZERO BASED BUDGET Definition

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ZERO BASED BUDGET is where the expenses or costs of the prior year are not taken into consideration when establishing expense or budgetary levels looking forward. Each expense category starts from zero. All expenses or cost levels within the budget must be justified or re-justified as being necessary; thus "zero-base".

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EFFECTIVENESS is producing a desired outcome. An audit procedure is effective if the evidence supports a correct conclusion.

OPTIMAL PRICE is the profit maximizing price. It can be determined through various methods, but generally it is the demand price for the full capacity output of any given product.

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