A static budget reportA) shows costs at only 2 or 3 different levels of activity.B) is appropriate in evaluating a manager's effectiveness in controlling variable costs.C) should be used when the actual level of activity is materially different from the master budget activity level.D) may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

Question

A static budget reportA)  shows costs at only 2 or 3 different levels of activity.B)  is appropriate in evaluating a manager's effectiveness in controlling variable costs.C)  should be used when the actual level of activity is materially different from the master budget activity level.D)  may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

Victoria Brown · Accepted Answer

Final Answer : D, Explanation :  A static budget is designed for a single level of activity and does not change with the actual level of activity. Therefore, it is most appropriate for evaluating a manager's effectiveness in controlling costs that do not change with the level of activity, i.e., fixed costs.

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