Budgetory Control

How are fixed and variable costs different?

• Fixed costs are expenses that fluctuate based on the level of production or sales, while variable costs are expenses that do not change.
• Fixed costs are expenses that do not change regardless of the level of production or sales, while variable costs are expenses that fluctuate based on the level of production or sales.
• Fixed costs are expenses that do not affect the level of production or sales, while variable costs are expenses that do not change.
• Fixed costs are expenses that increase with the level of production or sales, while variable costs are expenses that do not change.

How is the performance of responsibility centers monitored in effective budgetary control?

• By comparing actual costs and revenues with the budget for the period.

• By recognizing different cost behavior patterns

• By constructing a flexible budget with reference to the behavior of costs at different levels of activity.

• By comparing a flexible budget (based on the actual activity level) with the actual results.

How is the variable cost per unit calculated in the high-low method?

• Total costs - Units produced
• Total costs / Units produced
• Units produced / Total costs
• By dividing the difference in total costs by the difference in activity levels.

What are fixed budgets primarily used for?

• Planning and controlling expenses
• Managing employee salaries
• Setting long-term financial goals
• Tracking revenue

What happens to the comparison of actual costs and revenues with the budget if activity levels fluctuate?

• The actual results should be compared with a fixed budget..

• The comparison will not be affected.
• The actual results should be compared with a flexible budget.

• The comparison will be affected.

How are cost behavior patterns determined in the preparation of flexible budgets?

• By using the high-low method.

• By determining the difference between total costs at the highest and lowest activity levels.

• By calculating the budget cost allowance for each cost item.

• By dividing each cost figure by the related activity level.

What is the high-low method used for?

• Analyzing fixed and variable cost elements of a semi-variable cost.

• Predicting the cost to be incurred at any activity level within the relevant range.

• Calculating the budget cost allowance for each cost item.

• Determining the difference between total costs at the highest and lowest activity levels.

What is the purpose of effective budgetary control?

• The purpose of effective budgetary control is to ignore financial resources.
• To compare actual costs and revenues with the budget for the period.

• The purpose of effective budgetary control is to restrict financial resources.
• The purpose of effective budgetary control is to mismanage financial resources.

What is the linear equation used for in the high-low method?

• To predict the cost for a given activity level.

• To analyze fixed and variable cost elements of a semi-variable cost.

• To determine the fixed cost.

• To calculate the budget cost allowance for each cost item.