Problem:

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

a) “Because we are the 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 by the budget process so that managers don’t need to really understand budgeting.” (IT Manager)

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

d) “Qualitative factors commonly favour making over buying the component” (Production Manager)

e) “Past costs are indeed relevant in most instances since they provide the point of departure for the overall decision process.” (Managing Director)