The Following Events Took Place When Managers A, B, and C

question 81

Multiple Choice

The following events took place when Managers A, B, and C were preparing budgets for the upcoming period:
I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local authorities.
II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor.
III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the department when preparing the labor budget.
Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example of building slack in budgets?

• A) I only.
• B) II only.
• C) III only.
• D) I and II.
• E) II and III.

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Definitions:

Supply Curve

A graph showing the relationship between the price of a good and the quantity supplied, with price on the vertical axis and quantity on the horizontal axis.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the point where supply and demand curves intersect.

Equilibrium Price

The market price at which the supply of an item equals the demand for the item, leading to a stable market condition.

Digital Cameras

Electronic devices used to capture and store photographs in digital format.