A static budget
A) should not be prepared in a company.
B) is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs.
C) shows planned results at the original budgeted activity level.
D) is changed only if the actual level of activity is different than originally budgeted.

Question

Quizplus · Accepted Answer

A static budget shows planned results at the original budgeted activity level and does not take into account any changes in activity levels. It is useful for a company to have a static budget as a reference point for performance evaluation and goal setting, but it should also be flexible and adaptable to changes in business operations. Option A is incorrect as a budget is an essential tool in managing a company's finances. Option B is incorrect because a static budget only shows planned results and cannot be used to evaluate performance based on actual costs. Option D is incorrect because a static budget is not changed even if the actual level of activity is different from the original budgeted activity level.

A Static Budget