Question

Zin, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are performed; on the other hand, activity could jump to 94,000 hours if one of Zin's major competitors likely goes bankrupt. A flexible cash budget to determine cash needs would best be based on:

a. 78,000 hours.

b. 85,000 hours.

c. 94,000 hours.

d. 78,000 hours and 94,000 hours.

e. 78,000 hours, 85,000 hours, and 94,000 hours.

Answer 1

e. 78,000 hours, 85,000 hours, and 94,000 hours.

Step-by-step explanation:

The flexible cash budget is that budget which is adjusted according to the volume changes

Like in the question, it is given that

Expected machine hours = 85,000 machine hours

Drop activity = 78,000 hours

Increase in activity = 94,000 hours

So, we recognize all of three for flexible cash budget to make the comparison and take the decision accordingly based on the best performance