The Purpose of a Flexible Budget Is To

question 197

Multiple Choice

The purpose of a flexible budget is to:

• A)remove items from performance reports that are not controllable by managers.
• B)permit managers to reduce the number of unfavorable variances that are reported.
• C)update the static planning budget to reflect the actual level of activity of the period.
• D)reduce the amount of conflict between departments when the master budget is prepared.

---

Definitions:

Unintended Inventory Changes

Variations in stock levels that occur when actual sales differ from anticipated sales, not resulting from planned actions by businesses.

Keynesian Models

Economic theories that emphasize the total spending in the economy and its effects on output and inflation, developed by John Maynard Keynes.

Planned Investment

Expenditures that businesses intend to make in the future for new capital assets, such as buildings and machinery, to increase production capabilities.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by high unemployment, deflation, and a drop in global GDP.