See the solution attached below
Numbers 1 & 2 are worth 2 points each.
1. A _____________________________ budget is prepared before the period begins and is valid for only the planned
level of activity. It should not be used for evaluating how well costs are controlled.
Answer: Static planning budget
2. When a flexible budget is used in performance evaluation, actual costs are compared to:
a) budgeted costs at budgeted activity levels.
b) what the costs should have been for the actual level of activity.
c) the static planning budget.
d) what the costs should have been for the planned level of activity.
3. Short answer, worth 6 points. Tell as much as you know, based on the information we've learned in
chapter 9. Feel free to add more rows to the answer box if you need more space.
How would the shutting down of a business (due to, say, a global health crisis) impact the budgeting process
for that business?
Shutting down a business will lead to ...
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