What is the primary difference between a static budget and a flexible budget? a. The static budget contains only fixed costs, while the flexible budget contains only variable costs. b. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. c. The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. d. The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.

In an activity flexible budget, the variable cost component typically corresponds to     those resources that vary with direct labor hours.     resources acquired as needed.     resources acquired in advance of usage.     resources that do not change as the activity output changes.     None of these.

Compare and contrast a flexible budget and a static budget

A flexible budget depicted graphically O differs from a CVP graph in that sales revenue is not shown. differs from a CVP graph in the way that fixed costs are shown. O is identical to a CVP graph. O differs from a CVP graph in the way that variable costs are shown.

Which ONE of the following is true?   a. Assume all costs are fixed when creating a flexible budget b. None of the other available answers are true c. There can only be one cost driver d. Unfavorable activity variances for costs will typically accompany a favorable activity variance for revenue. e. Variances are classified according to the impact on revenue f. Assume all costs are variable when creating a flexible budget

1. A budget is a detailed financial plan that quantifies future expectations and actions relative to acquiring and using resources. a. True b. False   2. Budgets should not be used to provide managers with “pre-approval” for the execution of spending plans. a. True b. False     3. A flexible budget is not designed to change with changes in activity level. a. True b. False   4. The production budget comes before the materials purchases budget. a.True b. False   5. The starting point for the master budget is an assessment of anticipated production next year. a. False b. True

What does a flexible budget performance report do that a simple comparison of budgeted to actual results does not do?

In preparing a Master Budget, the starting point and the first budget to be prepared is usually the Production Budget. E True False

1. A planning budget is prepared before the period begins and is valid for only the planned level of activity. TRUE OR FALSE 2. An unfavorable activity variance for a cost indicates that spending was higher than it should have been for the actual level of activity for the period. TRUE OR FALSE 3. The activity variance for revenue is unfavorable if the actual revenue for the period is less than the revenue in the static planning budget. TRUE OR FALSE 4. If the actual level of activity is 4% more than planned, then the fixed costs in the static budget should be increased by 4% before comparing them to actual costs.  TRUE OR FALSE

Which of the following statements is not correct?   The revenue budget is the starting point in preparing the master budget.   The revenue budget is constructed by multiplying the expected sales in units by the sales price.   The production budget is not based on the revenue budget.   The cash budget is used to determine whether the firm will have enough cash on hand.