Analyzing the Master Budget Simulation.

A. An increase in sales does not necessarily mean that there is a rise in material or labor cost. We must know what the inventory level is at the particular time of the rise in sales. If the inventory levels do not permit or coincide with the sales figures, we can assume that there is some rise in certain costs; such as direct labor. The rise in costs would be direct labor depending on what …

…just filed for bankruptcy. Due to unforeseen circumstances, Salud foods had to do what they needed to do to stay a float. Understanding what they needed (cash flow) they had to cut costs to remain a viable company until their sales rose to an acceptable percentage again. References: Brealey R.A., Marcus, A.J & Myers, S.C Fundamentals of Corporate Finance 2004<Tab/>(4th ed.): McGraw-Hill/Irwin, New York, NY