QUESTION

Explain with supporting reasons, whether or not you agree with each of the following statements:

a) Because we are a big manufacturing company we have a lot of fixed costs and thus our margin of safety is small (Chief Accountant).

b) Financial planning models guide managers through the budget process so that managers do not need to really understand budgeting. (IT Manager)

c) ZBB is more appropriate in a changing environment as compared to incremental budgeting approach. (Marketing Manager)

d) Qualitative factors generally favour making over buying a component (Production Manager)

e) Past costs are indeed relevant in most instances because they provide the point of departure for the entire decision process. (Managing Director)