Which one of the following is true concerning a static budget?
A)It is prepared at the end of the accounting period once actual results are known.
B)It is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs.
C)It shows planned results at the original budgeted activity level.
D)It reflects the level of activity at which the company will be most profitable.

Question

Quizplus · Accepted Answer

A static budget is prepared at the beginning of an accounting period and shows planned results at a specific level of activity, usually the original budgeted activity level. It does not take into account changes in activity levels or actual results. Option A is incorrect because a static budget is prepared before actual results are known. Option B is incorrect because actual variable costs may differ from planned variable costs due to changes in activity levels, which are not reflected in a static budget. Option D is incorrect because a static budget does not determine the level of activity at which the company will be most profitable.

Which One of the Following Is True Concerning a Static