A Major Weakness of Flexible Budgets Is That

question 283

Multiple Choice

A major weakness of flexible budgets is that:

• A)they are valid for only a single level of activity.
• B)they ignore fixed costs.
• C)they compare actual costs at one level of activity to budgeted costs at a different level of activity.
• D)none of these is a major weakness of flexible budgets.

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Definitions:

Present Value Factors

Financial multipliers used to calculate the present value of a future amount of money or stream of cash flows based on a specific discount rate.

Interest Revenue

Income earned on investments, loans, or accounts receivable that is generated from the interest charged.

Annual Return

The percentage of increase or decrease in the value of an investment over a one-year period, including dividends and appreciation.

Direct Financing Lease

A type of lease where the lessor records receivables equal to the net investment in the lease and recognizes income from interest over the lease term.