Ashland Inc.is a manufacturer of small appliances.For which of the following activities would Ashland be more likely to use a static budget than a flexible budget?
A) For planning the amount of direct materials that will need to be purchased in the upcoming year
B) For the evaluation of whether or not actual direct labour costs were reasonably close to budgeted direct labour costs
C) For the evaluation of whether or not actual manufacturing overhead costs were under or overapplied during the year
D) For the evaluation of whether or not employees made the most efficient use of their time

Question

Quizplus · Accepted Answer

Static budgets are typically used for planning purposes, such as determining the amount of direct materials to purchase, because they are based on a set level of output and do not change with actual levels of production or sales.