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:

Question

Quizplus · Accepted Answer

Since Zin Inc. is anticipating activity to vary between 78,000 hours and 94,000 hours, the flexible cash budget should be prepared for all three levels of activity. This will provide a more accurate picture of cash needs and enable the company to plan for different scenarios. Therefore, the best choice is to prepare a flexible cash budget for 78,000 hours, 85,000 hours, and 94,000 hours.

Zin, Inc Is Planning Its Cash Needs for an Upcoming Period