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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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To help assess performance, managers should use a

  1. a. static budget.
  2. b. master budget.
  3. c. continuous budget.
  4. d. before-the-fact flexible budget.
  5. e. None of these.

To determine

Identify the budget that managers should use to help assess performance.

Explanation

Flexible Budgets:

Flexible budgets are prepared for various levels of activities or outputs. This enables the entity to know the result for the selected level of activity.

e.

After-the-fact flexible budgets are used for assessment of performance in which actual and expected cost is compared at the level of actual units. After-the-fact flexible budget is not given in the options. Therefore, this is the correct option.

a.

With the use of static budget, comparison would be made amongst actual cost and budgeted cost computed at budgeted quantity. This would not bring reliable results for performance analysis. Therefore, this is not the correct option.

b.

Master budgets are overall budgets of an organization...

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