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Hello Tutor!!
In the answer they are saying that Static co unnecessary invest$6m but if they use rolling budget then would not invest in that production line which is not profitable at all.
My question is how can rolling budget determine that in which production line should be invest ?
Please tell me the date of the exam (I have all past questions, but I cannot remember which ones appeared in which exam 🙂 )
It is not that the budget determines what they should invest in. The problem is that they had invested because the fixed budgets they were basing their decisions had unrealistic targets. Using rolling budgets they would continually update the budgets and therefore they would have more realistic targets.
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