Asked by Parker Stanger on Jul 20, 2024
Verified
The selection of levels of activity to depict a flexible budget
1) will be within the relevant range.
2) is largely a matter of expediency.
3) is governed by generally accepted accounting principles.
A) 1
B) 2
C) 3
D) 1 and 2
Relevant Range
The band of production or activity levels within which the assumptions about cost behavior for a company remain valid.
Levels of Activity
Refers to the varying degrees of operation volume or intensity within a business.
Generally Accepted Accounting Principles
A set of accounting standards and practices that are widely used and accepted in the preparation of financial statements in the United States.
- Acquire knowledge on the theory and implementation of flexible budgets.
- Acquire knowledge on the variation of costs in the pertinent range.
Verified Answer
2) The selection of levels of activity may be a matter of expediency, as it may not always be possible or practical to include every possible level of activity in the budget. However, this should not take precedence over relevance and accuracy.
3) Generally accepted accounting principles do not specifically govern the selection of levels of activity for a flexible budget, but rather prescribe rules and guidelines for financial reporting in general.
Learning Objectives
- Acquire knowledge on the theory and implementation of flexible budgets.
- Acquire knowledge on the variation of costs in the pertinent range.
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