A Flexible Budget Enables Managers to Compute a Richer Set

question 33

True/False

A flexible budget enables managers to compute a richer set of variances than a static budget does.

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Definitions:

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the profits made will be greater than the interest payable.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.

ROCE

Return on Capital Employed; an economic metric that evaluates how effectively a firm uses its capital to generate profits.

Variable Costs

Expenses that shift in direct proportion to the amount of production or sales, like labor and materials.