Question

A disadvantage of static budgets is that they a.do not allow for possible changes in activity levels b.show the expected results of a responsibility center for several levels of activity c.are dependent on the previous year's actual results d.cannot be used by service companies

Answer 1

Answer:

Static budgets do not allow for possible changes in activity levels (A).

Explanation:

Budgets play a vital role in helping firms track their finances, know their expenses, and also identify methods to maximize profit. A static budget is a budget that is constant even though other factors like revenue and sales volume change.

The static budget is based on the firm's expected output level and revenue at the beginning of the accounting period that it is designed to cover. For example, if $5 million is made as revenue by a company for the last year, the company may create a static budget built on that particular revenue figure.