A problem with directly comparing a static planning budget to actual costs is that this comparison fails to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.

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This statement is true because a static planning budget does not take into account changes in activity levels, so any differences between the budgeted costs and actual costs could be due to factors beyond the control of the budget manager. For example, if actual sales were lower than expected, the resulting lower revenue could cause a discrepancy between the budgeted costs and actual costs, even if the budget manager effectively controlled costs. Therefore, it is important to analyze variances between the budget and actual costs while considering changes in activity levels and the effectiveness of cost control measures.

A Problem with Directly Comparing a Static Planning Budget to Actual