A Static Budget Is Appropriate in Evaluating a Manager's Performance

question 165

Multiple Choice

A static budget is appropriate in evaluating a manager's performance if

• A) actual activity closely approximates the master budget activity.
• B) actual activity is less than the master budget activity.
• C) the company prepares reports on an annual basis.
• D) the company is a not-for-profit organization.

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Definitions:

Insulating Cost Allocation

The approach in assigning overhead and indirect costs to goods or services to avoid fluctuations in cost assignments.

Cost Allocation Method

A technique used to assign indirect costs to products, services, or departments based on relevant cost drivers.

Overhead Per Drum

The allocation of indirect production costs to each drum produced, considering expenses not directly tied to production like rent and utilities.