A supermarket is located in a small local shopping centre. Management has recently been told that a competitor will be opening a store in the same location in the coming weeks. Since wages budgets and rosters are based on sales forecasts, senior management has informed department managers that they must reduce their labour hours by 40% in the coming weeks as they expect a large drop in sales when the competitor opens. Many staff who work on a casual basis will not be offered hours.

Required: (a) What type of budgeting approach is being used by management? Explain briefly.

(b) Identify a potential risk to profitability of cutting staff hours by 40% when the competitor opens.

(c) Identify a possible non-financial risk to the store associated with the casual staff hours being reduced.