Acct505 Class Activity Week 5 Essay
9–1 What is a static planning budget? A static budget is a budget that does not change as volume changes. If a company’s annual master budget is a static budget, the budget for sales commissions expense will be one amount such as $200,000 for the year. In other words, in a static budget the budgeted amount for sales commissions expense will remain at $200,000 even if the actual sales during the year are $3 million, $4 million or $5 million.
9–2 What is a flexible budget and how does it differ from a static planning budget? A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. The flexible budget is more sophisticated and useful than a static budget, which remains at one …show more content…
10–1 What is a quantity standard? What is a price standard? Quantity standards specify how much of an input should be used to make a product or provide a service. Price standards specify how much should be paid for each unit of the input. (Garrison 419)
10–2 Distinguish between ideal and practical standards. Ideal standards can be attained only under the best circumstances. They allow for no machine breakdowns or other work interruptions, and they call for a level of effort that can be attained only by the most skilled and efficient employees working at peak effort 100% of the time. Some managers feel that such standards spur continual improvement. These managers argue that even though employees know they will rarely meet the standard, it is a constant reminder of the need for ever-increasing efficiency and effort. Few organizations use ideal standards. Most managers feel that ideal standards tend to discourage even the most diligent workers. Moreover, variances from ideal standards are difficult to interpret. Large variances from the ideal are normal and it is therefore difficult to