Redoing the Budget to Actual Output Is Most Useful

question 32

Multiple Choice

Redoing the budget to actual output is most useful:

• A) for planning purposes.
• B) to calculate profitability accurately.
• C) as a tool to help evaluate performance.
• D) when actual output equals budgeted output.

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Definitions:

Relevant Range

The range of activity within which the assumptions about fixed and variable costs in cost-volume-profit analysis are valid.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Contribution Margin

The difference between sales revenue and variable costs, representing the amount that contributes towards covering fixed costs and generating profit.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, used in financial analysis and grading.