KM MC Case #2 flex Budgets

Which of the following statements are true? You may select more than one answer.

1. The variance analysis cycle involves analyzing differences between actual results and what should have occurred according to the budget.
2. Management by exception permits managers to focus on the most significant variances, and ignore immaterial differences from the budget.
3. A static planning budget is suitable for planning, and is also appropriate for evaluating how well costs are controlled.
4. A flexible budget adjusts the static planning budget for actual activity. It is an estimate of what revenues and costs should have been, given the actual activity of the period.

Multiple Choice

• True statements include #1, #2, and #4

• True statements include #1, #2, #3, and #4

• True statements include #1, and #2

• Only statement #1 is correct.