A Regulatory Approach That Establishes a Level of Output or Activity

question 59

Multiple Choice

A regulatory approach that establishes a level of output or activity that a business must either meet or not exceed is:

• A) a tax.
• B) a marketable permit.
• C) moral suasion.
• D) command and control.

Understand the distinctions between manufacturing and merchandising budget needs.

Understand the concept of operating leverage and its relevance to the cost structure.

Grasp the fundamentals and applications of cost-volume-profit (CVP) analysis.

Identify and explain the concepts of fixed, variable, and mixed costs in relation to production levels.

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Definitions:

Flexible Budget Performance Report

compares actual results to budgeted amounts adjusted for the actual level of output, aiding in the evaluation of financial performance.

Cost Driver

A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs.

Activity Variances

Differences between planned activities (budgeted) and actual activities in management accounting, used for monitoring performance and guiding decisions.

Flexible Budget

A budget that adjusts or flexes with changes in the volume or activity level, allowing for better budgetary control under different operational circumstances.