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.

Question

Quizplus · Accepted Answer

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.

A Static Budget Is Appropriate in Evaluating a Manager's Performance