Connie Rice has prepared the following list of statements about budgetary contro
ID: 2457211 • Letter: C
Question
Connie Rice has prepared the following list of statements about budgetary control. Budget reports compare actual results with planned objectives. All budget reports are prepared on a weekly basis. Management uses budget reports to analyze differences between actual and planned results and determine their causes. As a result of analyzing budget reports, management may either or modify future plans. Budgetary control works best when a company has an informal reporting system. The primary recipients of the sales report are the sales manager a supervisor. The primary recipient of the scrap report is the production manager. A static budget is a projection of budget data at one level of activity. Top managements reaction to unfavorable differences is not influenced by the materiality of the difference. A static budget is not appropriate in evaluating a manager's effectiveness in controlling costs unless the actual activity level approximates the static budget activity level or the behavior of the costs is fixed. Identify each statement as tue or false. If false, indicate how to correct the statement.Explanation / Answer
1. True. Budget reports compare actual results with the planned objectives.
2. False. Budgets reports are prepared whenever required even if it is frequent.
3. True. Management uses budget reports to analyze differences between actual and planned results and determine their causes.
4. True. As a result of analyzing budget reports, management may either take corrective actions or modify future plans.
5. False. Budgetary control works best when the company has a formalized reporting system.
6. False. The primary recepients of sales report are the sales manager and top management.
7. True. The primary recepient of srap report is production manager.
8. True. A static budget is a projection of budget data at one level of activity.
9. False. Top management's reaction to unfavourable differences is influenced by the materiality of the difference.
10. True. A static budget is not appropriate in evaluating a manager's effectiveness in controlling costs unless the actual activity level approximates the static budget level or the behaviour of the cost is fixed.
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