Question

At Taylor Activewear, orders have significantly exceeded projections, and Macon, the operations director, has decided to hire for a third shift in the plant. Macon is clearly operating with the use of a(n) _____ budget.

• zero-based

• incremental

• cash

• fixed

• variable

Answer 1

1. E. VARIABLE

When we consider the above scenario, we can say that since there is no fixed reference point, we would not have a fixed budget, we are also not using zero-based or cash budget, rather, the understanding between incremental and variable is being utilized where incremental would be used in the case the demand shows constant trend, while in the above case, we will make use of variable budget.