Which One of the Following Is an Example of a "Flexibility

question 7

Multiple Choice

Which one of the following is an example of a "flexibility" option?

• A) a company has an option to close down an operation if it turns out to be unprofitable.
• B) a company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
• C) a company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
• D) a company invests in a jet aircraft so that its ceo, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly commercial.
• E) a company has an option to invest in a project today or to wait a year.

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Definitions:

Static Budget

A fixed budget that does not change with actual activity levels, designed for planning purposes.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, providing a more useful tool for performance evaluation.

Master Budget

A comprehensive financial planning document that includes all of an organization's financial plans and budgets.

Goal Conflict

A situation where two or more goals are in opposition, making it difficult to achieve one without compromising the other.