Asked by Gisella Perez on Jul 20, 2024
Verified
A static budget is appropriate in evaluating a manager's performance if
A) actual activity closely approximates the master budget activity.
B) actual activity is less than the master budget activity.
C) the company prepares reports on an annual basis.
D) the company is a not-for-profit organization.
Master Budget Activity
The comprehensive aggregation of all individual budgets and plans into one complete financial budget, covering all aspects of the organization's operations.
Not-for-profit Organization
An organization that operates for purposes other than generating profit, where surplus revenues are reinvested to further its mission.
- Discriminate between the characteristics of static and flexible budgets and their significance for managerial governance.
Verified Answer
MZ
Mayte ZambranoJul 23, 2024
Final Answer :
A
Explanation :
A static budget is appropriate in evaluating a manager's performance if actual activity closely approximates the master budget activity. This is because a static budget is based on a fixed set of assumptions and does not adjust for changes in actual activity levels. If the actual activity closely approximates the master budget activity, then the static budget can be a good indicator of the manager's performance. However, if actual activity varies significantly from the master budget activity, then a flexible budget may be more appropriate for evaluating the manager's performance.
Learning Objectives
- Discriminate between the characteristics of static and flexible budgets and their significance for managerial governance.