Asked by Mostafa Naweto on Jun 22, 2024
Verified
A static budget report
A) shows costs at only 2 or 3 different levels of activity.
B) is appropriate in evaluating a manager's effectiveness in controlling variable costs.
C) should be used when the actual level of activity is materially different from the master budget activity level.
D) may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.
Static Budget Report
A financial report based on the assumption of a fixed level of activity and expenditure, without adjusting for variations in actual performance.
Master Budget Activity Level
The projected volume of activity, such as sales or production, that is anticipated and used as a basis for the master budget.
- Identify the differences between static and flexible budgets and their consequences on management control.
Verified Answer
VB
Victoria BrownJun 23, 2024
Final Answer :
D
Explanation :
A static budget is designed for a single level of activity and does not change with the actual level of activity. Therefore, it is most appropriate for evaluating a manager's effectiveness in controlling costs that do not change with the level of activity, i.e., fixed costs.
Learning Objectives
- Identify the differences between static and flexible budgets and their consequences on management control.
Related questions
A Static Budget Is Appropriate in Evaluating a Manager's Performance ...
The Flexible Budget Report Evaluates a Manager's Performance in Two ...
A Static Budget Is an Effective Means to Evaluate a ...
A Static Budget Is Most Useful for Evaluating a Manager's ...
A Flexible Budget Can Be Prepared for Each of the ...