Which of the Following Is True of a Performance Report

question 67

Multiple Choice

Which of the following is true of a performance report?

• A) In preparing a performance report, static budgets are usually a good choice for benchmarks.
• B) It compares actual costs with budgeted costs from the master budget.
• C) It is prepared only if the top management has only superficial participation in the budgeting process.
• D) To create a meaningful performance report, a static budget should be used.
• E) To create a meaningful performance report, actual costs and expected costs should be compared at different levels of activity.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.

Capital Budgeting

The process used by companies to evaluate and prioritize major investments or projects based on their potential to generate returns over time.

Cannibalization

The situation where a new product eats into the sales of one of the company's existing products, potentially reducing overall sales.

Net Present Value (NPV)

A valuation method used to assess the profitability of an investment by calculating the present value of expected future cash flows minus the initial investment cost.