If a Static Budget Forecasted 100,000 Units to Be Sold

question 132

Multiple Choice

If a static budget forecasted 100,000 units to be sold in the fiscal year and actual units sold amounted to 120,000, what assumption could be made under a flexible budget process?

• A)Since the actual volume exceeds the budgeted volume, there is an unfavorable volume variance for output.
• B)Fixed costs would increase in the flexible budget due to the volume change.
• C)The effectiveness of the manager is in question.
• D)Variable costs will be higher than projected in the static budget due to the volume variance.

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Definitions:

Interest Rate

The percentage charged on a loan or paid on savings over a period of time, typically expressed annually.

Purchase Cost

Purchase Cost is the total expense incurred to acquire an asset or service, including the price paid and any additional charges necessary to put it into use.

Accrued Interest

Interest that has been incurred but not yet paid, often referring to the interest accruing on a bond between payment periods.

Sale Received

The funds collected from the sale of goods or services.