COST ACCOUNTING
FLEXIBLE BUDGETS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
the difficulty in developing such budgets due to the high cost of gathering the necessary information.
|
|
|
the cost behavior pattern of manufacturing overhead, which is primarily fixed.
|
|
|
the assumption that all factors remain constant
|
|
|
their length and complexity.
|
Detailed explanation-1: -Incremental budgeting is the traditional budgeting method whereby the budget is prepared by taking the current period’s budget or actual performance as a base, with incremental amounts then being added for the new budget period.
Detailed explanation-2: -Inaccurate or unreasonable assumptions can quickly make a budget unrealistic. Budgets can lead to inflexibility in decision-making. Budgets need to be changed as circumstances change. Budgeting is a time consuming process – in large businesses, whole departments are sometimes dedicated to budget setting and control.
Detailed explanation-3: -An incremental budget is a budget that is prepared by taking the current period’s budget or actual performance and using it as a base and then adjusting it by incremental amounts. This is typically accomplished by taking the prior year’s budget and adjusting for some increase in costs.