Asked by Ashley Pillatos on Jun 22, 2024
Verified
A static budget is an effective means to evaluate a manager's ability to control costs regardless of the actual activity level.
Static Budget
A budget that remains unchanged over the period it covers, regardless of changes in sales volume, production levels, or other external factors, often used for fixed expenses.
Control Costs
The practice of managing and regulating expenses to ensure they do not exceed budgets.
Activity Level
A measure of the volume of production or operations, usually influencing costs and revenues in managerial accounting.
- Differentiate between static and flexible budgets and their implications for managerial control.
Verified Answer
RA
Ruben Alejandro AlbertoJun 23, 2024
Final Answer :
False
Explanation :
A static budget is based on a fixed activity level and does not account for changes in actual activity or volume. Therefore, it is not an effective means to evaluate a manager's ability to control costs in varying levels of activity or volume. A flexible budget that adjusts for changes in activity level would be more appropriate for such evaluation.
Learning Objectives
- Differentiate between static and flexible budgets and their implications for managerial control.