Question

If the actual level of activity is 4% more than planned, then the costs in the static budget should be increased by 4% before comparing them to actual costs.

True or False

a) If you answered true, explain why it is true or the paragraph and page number of the textbook on which you are basing your response.

OR

b) If you answered false, explain what is false about the question or how it could be changed to make it a true statement.

Answer 1

Answer)

My answer would be false.

b)A Static budget is a type of budget that contains all the anticipated values about inputs and outputs that are recorded in previous period.Hence,we should not change the values in static budget as it just budgeted not only for costs but also for planned level of activity also.Hence,we cannot change it with actuals.

IMy answer would be true if the statement be like if the actual level of activity is 4% more than planned, then the costs in the static budget needn't be changed before comparing them to actual costs