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Questions and Answers
Which type of budgeting would be most suitable for a manufacturing firm with fluctuating production levels?
Which type of budgeting would be most suitable for a manufacturing firm with fluctuating production levels?
- Incremental budgeting
- Flexible budgeting (correct)
- Zero-based budgeting
- Static budgeting
What is a key characteristic of flexible budgeting?
What is a key characteristic of flexible budgeting?
- It is used for discrete projects
- It allows for adjustments to the budget based on actual activity levels (correct)
- It is based on manager input
- It shows the changes in sales or production levels
Which of the following is a limitation of using static budgeting in a manufacturing firm with peak seasons?
Which of the following is a limitation of using static budgeting in a manufacturing firm with peak seasons?
- It is used for discrete projects
- It does not account for changes in production levels (correct)
- It allows for adjustments to the budget based on actual activity levels
- It is based on manager input
What is the main difference between zero-based budgeting and flexible budgeting?
What is the main difference between zero-based budgeting and flexible budgeting?
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Which type of budgeting is least suitable for a manufacturing firm with peak seasons?
Which type of budgeting is least suitable for a manufacturing firm with peak seasons?
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Study Notes
Budget Methodologies
- A manufacturing firm experiences peak seasons: summer and the last two weeks of February.
- During peak seasons, the firm leases additional production equipment and hires temporary employees.
- The firm's production output increases during these periods.
- Flexible budgeting is the best fit for this firm's needs.
- Flexible budgeting allows for adjustments to the budget based on actual activity levels.
- This technique is suitable for the firm due to its varying production levels during peak seasons.
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Description
Discover the best budgeting technique for a manufacturing firm with peak seasons. Learn how to manage increased output and temporary employees during busy periods.
