9. Match the following definitions with their terms. a. b. C. d. e. Relevant ran

Question

9. Match the following definitions with their terms. a. b. C. d. e. Relevant range Break-even point Contribution margin Fixed costs Variable costs 1. Vary in proportion to changes in activity levels 2. Remain the same in total dollar amount as the level of activity changes 3. Where a business's revenue equals costs 4. A specific activity range over which the cost changes are of interest 5. The excess of sales over variable costs. 10. What is the purpose of creating and setting budgets? 11. Define a "static budget" 12. Define a "continuous budget".

Explanation / Answer

9.

Relavent range = Range of activity within which the variable and fixed cost functions remain valied.

Breakeven point = Output level at which total costs and total revenues are equal.

Contribution margin = The amount remaining from sales revenue after variable expenses are deducted.

Fixed costs = Costs that remains the same regardless of the changes in the level of activity within a relavent range.

Variable costs = Cost that varies in total in direct proportion to changes in the level of activity within a relavent range.

a. 4

b. 3

c. 5

d. 2

e. 1

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10. The purpose of creating and setting budgets is to identify the resources and commitments needed to satisfy the entity's goals over a period of time and to set specific targets for income, cash flows and financial position.

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11. Static budget is the budget which is set at the beginning of the period with the estiamted volume, estimated costs and estiamted revenues.  

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12. Continuous budget is the budget which adds a new period onto the budget at the end of each period so there are always several periods planned for the future and the budget remains upto date with the operating environment.

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