For What Purpose Is a Flexible Budget Used

question 17

Multiple Choice

For what purpose is a flexible budget used?

• A)To provide various possible outcomes for management to consider.
• B)To adjust input prices so that future variances are eliminated.
• C)To insure that profit does not drop below a predetermined level.
• D)To identify the sources of variances.

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Definitions:

U.S. GAAP

Generally Accepted Accounting Principles as practiced in the United States, a framework of accounting standards, principles, and procedures.

Reversing Temporary Difference

A temporary difference that will result in deductible amounts in future years, affecting taxable income.

Originating Temporary Difference

An originating temporary difference in accounting refers to the initial differences between the book value of an asset or liability and its tax base, which will result in taxable or deductible amounts in the future.

Permanent Difference

An accounting difference between the taxable income and accounting income that will not reverse in future periods.