Which of the following is true of static budgets?a. They provide budgeted costs for a variety of activity levels.b. They provide expected costs for a variety of activity levels.c. They are developed around a single level of activity.d. They are very useful in preparing performance reports.
C
The correct answer is C. They are developed around a single level of activity.
A static budget is a type of budget that is prepared for a specific period or level of activity. It is not adjusted based on any changes in actual activity. Static budgets show the expected revenue, expenses, and profits at one particular level of activity, usually the planned level, allowing companies to plan ahead based on this information.
Static budgets may not be relevant or useful for companies whose levels of activity frequently fluctuate. For such firms, a flexible budget may be more appropriate, as it can be adjusted to reflect changes in the actual level of activity.
Therefore, option C is correct as static budgets are developed around a single level of activity. Option A is incorrect because it talks about budgeted costs for a variety of activity levels which is not a feature of the static budgets. Option B is also incorrect as it talks about expected costs for a variety of activity levels which is not applicable to static budgets. Option D is incorrect because static budgets are limited in their use when it comes to preparing performance reports, as it does not reflect any changes in actual activity.
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