Jake Palermo has prepared the following list of statements about budgetary contr
ID: 2386754 • Letter: J
Question
Jake Palermo has prepared the following list of statements about budgetary control. Identify each statement as true or false.****If false, indicate how to correct the statement.
1. Budget reports compare actual results with planned objectives.
2. All budget reports are prepared on a weekly basis.
3. Management uses budget reports to analyze differences between actual and planned results and determine their causes.
4. As a result of analyzing budget reports, management may either take corrective action or modify future plans.
5. Budgetary control works best when a company has an informal reporting system.
6. The primary recipient of the scrap report is the production manager.
7. A static budget is a projection of budget data at one level of activity.
8. Top management’s reaction to unfavorable differences is not influenced by the materiality of the difference.
9. 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.
Explanation / Answer
1. Budget reports compare actual results with planned objectives. False - Variance reports compare actual results with planned objectives 2. All budget reports are prepared on a weekly basis. False - Bugdets may be prepraed for weekly, monthly or yearly basis 3. Management uses budget reports to analyze differences between actual and planned results and determine their causes. False - Management uses variance reports to analyze differences between actual and planned results and determine their causes 4. As a result of analyzing budget reports, management may either take corrective action or modify future plans. True 5. Budgetary control works best when a company has an informal reporting system. False - Budgetary control works best when a company has an formal reporting system 6. The primary recipient of the scrap report is the production manager. True 7. A static budget is a projection of budget data at one level of activity. True 8. Top management’s reaction to unfavorable differences is not influenced by the materiality of the difference. False - Top management’s reaction to unfavorable differences is influenced by the materiality of the difference 9. A static budget is not appropriate in evaluating a manager’s effectiveness in controlling costs unless the actual activity level approxi. True
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