Which statement is true concerning a static budget report?
A)It considers performance at numerous activity levels.
B)It is appropriate in evaluating a manager's effectiveness in controlling fixed costs.
C)It should be used when the actual level of activity is materially different from the master budget activity level.
D)It is most effective when evaluating a manager's effectiveness in controlling variable costs.

Question

Quizplus · Accepted Answer

A static budget only considers one level of activity and does not adjust for changes in volume. Therefore, it is not appropriate for evaluating a manager's effectiveness in controlling variable costs or performance at numerous activity levels. However, it can be useful in evaluating a manager's ability to control fixed costs, as these costs do not change with changes in activity level. The static budget may also be appropriate when actual activity level is close to the master budget activity level, but if there is a material difference in activity level, a flexible budget would be more appropriate for variance analysis.

Which Statement Is True Concerning a Static Budget Report