Which of the following is NOT a standard component of a partial budget?

• A. Increased revenue from the change
• B. Increased costs due to the change
• C. Exclusion of fixed costs that do not change
• D. Depreciation of existing assets

Answer: (D)

Partial budgeting focuses only on changes in cash flow that come from a proposed change. It lists items that actually vary with the decision: the additional revenue the change would generate, any costs added by the change, any costs saved or reduced because of the change, and any revenue lost due to the change. It also excludes fixed costs that don’t change with the decision, since they would be the same whether you adopt the change or not. Because partial budgeting uses cash flows, non-cash items like depreciation aren’t included in the analysis. That’s why depreciation of existing assets is not a standard component. The other items—increased revenue, increased costs due to the change, and the exclusion of fixed costs that do not change—are part of the standard components.