variable overhead costs. Select the cost-allocation bases to use in allocating variable overhead costs to the output produced. In other words, overhead cost variance is under or over absorption of overheads. 3. Unfavorable. Built-in cost controls and accountability since there's no "wiggle room" built into the budget. 53. direct materials costs. Planning to undertake only those variable overhead activities that add value for customers using the product or service, and 2. Solved > Accounting: Concepts & Applications, 11e Chapter ... none of these. Accounting Exam #03 Flashcards | Quizlet However, this comparison may be like comparing apples to oranges because variable costs should follow production, which should follow sales. A static budget variance is the difference between actual results and the expected results in the static budget. Leed Company prepares a flexible budget for 70%, 80%, 90% and 100% capacity. In Class Quiz. A static budget is appropriate for: a) variable overhead ... Budgeted variable manufacturing overhead costs for 15,000 units $322,500 Actual output units produced 44,000 units Actual machine-hours used 14,400 hours Actual variable manufacturing overhead costs $484,000 6) What is the budgeted variable overhead cost rate per output unit? A static budget essentially predicts a business's variable and fixed costs, which means that you'll be tracking actual output, volume, and revenue throughout the accounting period. c. Variable. 2. A static budget can be similar in that it projects expected costs and expenses, however, while the static budget remains fixed, the operational budget may change according to a company's revenue and operational costs. Mixed. This budget format is the simplest and most commonly used budgeting format. c) fixed overhead costs. PDF A static budget is appropriate in evaluating a manager's ... A static budget is a type of budget that incorporates anticipated values about inputs and outputs that are conceived before the period in question begins. Chapter 10-17 A static budget is useful in controlling costs when cost behavior is: a. A static budget is appropriate for: a. variable overhead costs b. direct materials costs c. fixed overhead costs d. none of these and Variable OverHead (VOH) . How to Calculate Static Budget Variances - The Motley Fool If actual variable costs per unit are equal to estimated variable costs per unit and a static budget is used, fewer units produced will show: . A flexible budget should be prepared for each of the types of budgets included in the master budget. Static Budget. Actual Costs Incurred Static Budget Activity level (in units) 200 220 Variable costs: Supplies $4,050 $4,906 Power $1,690 $1,892 Fixed costs: Administration $6,240 $6,200 Depreciation $6,280 $6,200 a. Select the cost-allocation bases to use in allocating variable overhead costs to the output produced, 3. Planning to use the drivers of costs in those activities in the most efficient way. PDF A static budget is appropriate in evaluating a manager's ... b. is appropriate in evaluating a manager's effectiveness in controlling variable costs. Answer: False Difficulty: 1 Objective: 3. 3. Meaningless. A static budget is appropriate for a. variable overhead costs. c. a projection of budget data at several levels of activity within the relevant range of activity. . Hence, it is more appropriate for the fixed overhead costs of the company. If a company incurs an $250 expense for utilities in January and expected to incur an $150 expense, there is a $100 unfavorable spending variance.The spending variance concept is most commonly applied to: Great for a master budget. Do not change the budgeted amounts for . Great for a master budget. a. Marc Inc. is in the process of establishing a new manufacturing unit in the US. . The budget period for variable-overhead costs is typically 12 months. $19.53/machine hourd. 6. not relevant. 1 Answer to The variable overhead costs in a static budget, based on 10,000 direct labor hours, were $60,000. Easy to implement and follow since they do not require constant updating. Budgeted fixed monthly factory overhead costs P85,000 Variable factory overhead P4.00 per direct labor hour For the month of January, the standard direct labor hours allowed were 25,000. d. Linear. Actual results are compared to the static budget numbers as one means to evaluate company performance. For this purpose, the company wishes to prepare a static budget with the following available data: - Variable overhead cost formula = variable overhead cost / activity level Fixed overhead costs do not change as the level of activity changes. Comparison based on budget data for 10,000 units - the original activity level which is . Choose the period to be used for the budget, 2. EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000 Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 2,110,000 41. A favorable variable overhead spending variance can be the result of paying lower prices than budgeted for variable overhead items such as energy. Overhead Variance: Classification and Methods (With Calculations) Overhead cost variance can be defined as the difference between the standard cost of overhead allowed for the actual output achieved and the actual overhead cost incurred. A static budget is appropriate for: a. fixed overhead costs. Static budget is appropriate in evaluating a manager's effectiveness in controlling costs when: 1. *Actual variable-overhead rate (AVR) $6.40 per hour 50,000 $320,000 actual hours actual variable overhead cost †Column (4) is not used to compute the variances. The master budget, and all the budgets included in the master budget, are examples of static budgets. direct labor costs. This updates the variable costs in the flexible . $20.83/machine hour EKPN Company prepared the following data in its static budget based on 150,000 machine hours:Direct Materials $ 450,000Direct Labour 225,000Variable Overhead 1,125 . Fixed manufacturing overhead costs remain the same in total even though the production volume increased by a modest amount. At the beginning of the year, the static budget for variable overhead costs included the following data: 6,200 units. $7.03/machine hourb. In a static budget, marketing expense may be set at $200,000. . A flexible budget can be prepared for each of the types of budgets included in the . Variable cost increase with . The activity index used in preparing a flexible budget should be the basis of the variable costs that are being budgeted. fixed overhead costs. The activity index used in preparing a flexible budget should be the basis of the variable costs that are being budgeted. The company is planning for availing loan from US Bank of $10,00,000. 1. A static budget is usually appropriate in evaluating a manager's effectiveness in controlling a. fixed manufacturing costs and fixed selling and administrative expenses. Definition. A static budget is not appropriate in evaluating a managerâ&#x20AC;&#x2122;s effectiveness if a company has a. substantial fixed costs. 9. At this level of activity, the following manufacturing overhead costs are expected: Indirect labor $45,000 Factory supplies $4,000 Indirect materials $21,000 Depreciation on factory building Total manufacturing overhead $85,000 If the company operates at 21,000 . c. planned activity levels that match actual activity levels. is a projection of budget data at one level of activity. fixed overhead costs. Offers great insight into a company's costs and profits, when you perform a variance analysis. A static budget-which is a forecast of. Instead of preparing a budget on a yearly basis, King's Apparel switches over to a monthly budget. Question 12 Which of the following is NOT involved in budgetary control? Flexible budget. o If the static budget expected total variable costs to be 100 units sold at a cost of $18 per unit, then $18 would be the per-unit variable cost formula for any number of units sold. b. direct materials costs. c. fixed overhead costs. When a business uses a static budget, the original budget plan never changes. A static budget is not appropriate in evaluating a manager's effectiveness if a company has a. substantial fixed costs. In a flexible budget, that expense could instead be set to 20% of sales. while the flexible budget contains only variable costs. The actual level of activity closely approximates the master budget activity level. d) None of these answers are correct. What is the primary difference between a static budget and a flexible budget? Offers great insight into a company's costs and profits, when you perform a variance analysis. Chapter 15: Allocation of Support-Department Cost, Common Cost, and Revenues. The variable overhead cost variance is $1,040 favorable. (static) budget and a variable (flexible) budget is that a fixed budget: A. includes only fixed costs . c. should be used when the actual level of activity is materially different from the master budget activity level. The actual level of activity closely approximates the master budget activity level and/or 2. d. no variable costs. we can calculate the flexible budget for any level of activity using these figures. The budgeted variable overhead costs for the 10, 500 actual direct labor hours were $63,000. Standards specify 0.1 direct labor hours per unit of product. $192,000 of variable costs in the flexible budget vs. $240,000 in actual variable costs is a $48,000 unfavorable variance, as additional costs decrease net income. For a company with $1 million in sales, these budgets start . A static budget report is appropriate for fixed manufacturing costs and for fixed selling and administrative expenses. 39.A static budget is appropriate in evaluating a manager's performance if. 4. For example, DEF Toy is a toy manufacturer and has total variable overhead costs of $15,000 when the company produces 10,000 units per month. Identify the variable overhead costs associated with each cost-allocation base. The budget period for variable-overhead costs is typically less than 3 months. 8-1 CHAPTER 8 FLEXIBLE BUDGETS, OVERHEAD COST VARIANCES, AND MANAGEMENT CONTROL 8-1 Effective planning of variable overhead costs involves: 1. Flexible budgets are particularly useful for organizations that have variable cost structures. b. A static budget is appropriate for: a) variable overhead costs. The behavior of the costs in response to changes in activity is fixed. Evaluating a manager's performance in controlling variable costs is effectively achieved using a static budget. For example, the property tax on a large manufacturing facility might be $50,000 per year and it arrives as one tax bill in December. Thus, even if actual sales volume changes significantly from the expectations documented in the static budget, the amounts listed in the budget are not changed. A spending variance, also known as a rate variance, refers to the difference between the actual and budgeted amount of an expense. the actual variable overhead cost and the variable overhead cost that should have been incurred Based on this information, the flexible budget for each month would be $40,000 + $10 per MH. a. variable overhead costs. 16. Solution #2 Flexible Budget Actual Difference Budgeted number of units sold 2,000 2,000 Expenses: Conversion costs $3.25/unit 6,500 7,000 500 U Salaries $8,000 8,000 7,600 400 F A static budget is appropriate for. c. planned activity levels that match actual activity levels. The actual direct labor hours for August were 10, 500. 4 Review Question d. None of these. overhead budget) States the frequencyof the report (such as . 8-4 Steps in developing a budgeted variable-overhead cost rate are: 1. Total variable cost $ 7.50 $ 60,000 $ 63,300 $ 3,300 U Fixed costs Depreciation $ 12,000 $ 12,000 $ $ 012,000 Insurance 2,000 2,000 2,050 50 U Total fixed cost $ 14,000 $ 14,050 50 U Total overhead costs $ 74,000 $ 77,350 $ 3,350 U CheeseCo. C. the two systems can show different overhead budget variances. A static budget is the type of budget in the organization in which there is no variations or changes in the level of the activity, either it is input or output. Source: Static Budget (wallstreetmojo.com) Example of Static Budget. If the business has had steady income and costs in the past -- and expects the same in the future -- then the static budget approach is appropriate. 12-4 Steps in developing a budgeted variable-overhead cost rate are: 1. Source: Static Budget (wallstreetmojo.com) Example of Static Budget. 4,100 units. Normal costing and standard costing differ in that A. normal costing is less appropriate for multiproduct firms B. only normal costing can be used with absorption costing. A static budget is not appropriate in evaluating a manager's effectiveness if a company has a. substantial fixed costs. Upload your study docs or become a Course Hero member to access this document Continue to access End of preview. 12) What are the benefits of variance analysis to a public official? d. a projection of budget data at a single level of activity. 8-4 Steps in developing a budgeted variable-overhead cost rate are 1. Haroot Company's master budget shows that the planned activity level for next year is expected to be 20,000 machine hours. Fixed Manufacturing Overhead: Standard Cost, Budget Variance, Volume Variance. Choose the period to be used for the budget, 2. Convert the static budget to a flexible budget using the budgeted per-unit amount for sales and variable costs, and the actual number of units produced. B 16. a. variable overhead costs. A static budget is appropriate for: A. variable overhead costs B. direct material costs C. fixed overhead costs . A static budget is appropriate in evaluating a manager's performance if . Pros of a Static Budget. Question: A static budget is appropriate for _____ variable overhead costs. none of these. to compare actual variable costs for 12,000 units with budgeted variable costs for 10,000 units. The allocation base for variable overhead costs is direct labor hours. $14,000. Not appropriate for variable costs LO 2: Evaluate the usefulness of static budget reports. For this purpose, the company wishes to prepare a static budget with the following available data: - Dryden Manufacturing Company prepared a flexible budget of 40,000 direct labor hours, with estimated overhead costs of $200,000 for variable overhead and $60,000 for fixed overhead. o If the static budget expected to sell 100 units at a price of $30 per unit, then $30 would be the per-unit revenue formula for any number of units sold. c. fixed manufacturing costs and variable selling and administrative expenses. Chapter 16: Cost Allocation: Joint Products and Byproducts. Select the cost-allocation bases to use in allocating variable overhead costs to the output produced, 3. the variable overhead costs associated with each cost-allocation base, and 4. Now that we know the variable costs per unit. Variable overhead cost formula = variable overhead cost / activity level Fixed overhead costs do not change as the level of activity changes. 6. excess of static-budget cost over flexible-budget cost (3) excess of static-budget cost over actual cost . A static budget is a budget that does not change with variations in activity levels. a. shows costs at only 2 or 3 different levels of activity. The static budget contains only fixed costs, while the flexible budget contains only variable costs. Notice how the variable costs change with volume but the fixed costs remain the same. will be encountered.There may also be a time delay between when there is a change in revenue and when a supposedly variable cost changes. Solution #2 Flexible Budget Actual Difference Budgeted number of units sold 2,000 2,000 Expenses: Conversion costs $3.25/unit 6,500 7,000 500 U Salaries $8,000 8,000 7,600 400 F . Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control. Copper Manufacturing has prepared the following monthly flexible manufacturing overhead budget for its Mixing Department COPPER MANUFACTURING Monthly Flexible Manufacturing Overhead Budget Mixing Department Activity level 4.000 Direct labor hours 3.000 Variable costs $ 4,000 20,000 3,000 15,000 Indirect materials Indirect labor Factory supplies . b. direct materials costs. 52. Question 11 What is a static budget appropriate for? Variable overhead cost category Standard cost per unit Maintenance $0.60 Indirect materials 1.40 Utilities 1.00 Total variable overhead cost $3.00 Fixed overhead cost category Budgeted annual cost Depreciation $ 40,000 Supervision 50,000 Insurance 10,000 Total fixed overhead cost $100,000 STATIC BUDGETS (cont'd) A static budget is a. compared to a flexible budget in a budget report. Dryden then prepared a flexible budget at 38,000 . Typically, the machine hours are between 4,000 and 7,000 hours per month. Create the budget model, where fixed costs are "hard coded" into the model, and variable costs are stated as a percentage of the relevant activity measures or as a cost per unit of activity measure. b. never appropriate in evaluating a manager's effectiveness in controlling costs. 11) The static-budget variance is the difference between the actual result and the corresponding budgeted amount in the static budget. The behavior of the costs in response to changes in activity is fixed. c. fixed overhead costs. This preview shows page 14 - 16 out of 56 pages. The variable cost per unit would be $1.50 ($15,000 . The static budget is prepared for a single . An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and that 50% of supervisory costs are controllable at the department level. Evaluating a manager's performance in controlling variable costs is effectively achieved using a static budget. It is included to point out that the flexible-budget amount for variable overhead, $240,000, is the amount that will be applied to Work-in-Process Inventory for product Say that a growing small business has a projected sales number of $500,000 and decides that its sales commissions are fixed at $10,000. c. fixed overhead costs. 2. b. substantial variable costs. 1. b. direct materials costs. Here are several examples:Sales increase, but factory overhead costs do not increase at a similar rate, since the sales are from . Testing Center Exam Window Open (6-8 . Judd Company uses standard costs for its manufacturing division. Variable costs: Total budgeted cost line $ 186,000 Fixed costs - 36,000 Variable costs at 50,000 hours 150,000 Activity level at intersect (hours) / 50,000 Variable costs per direct labor hour $ 3 Direct labor hours x 30,000 Total variable costs 90,000 Total fixed costs + 36,000 Total budgeted costs $ 126,000 Flexible Budgets SO 3 d. None of these. b. variable manufacturing costs and variable selling and administrative expenses. A static budget is appropriate for _____ variable overhead costs. A static budget report. direct materials costs. d. None of these. $7.50/machine hourc. Production managers identify an appropriate allocation base such as direct labor hours or direct labor costs. A) $10.75 B) $11.00 C) $32.25 D) $48.40 Answer: A 8-2 At the start of an accounting period . c. variable overhead costs. b. direct materials costs. Solution for A static budget is appropriate for a. variable overhead costs. 73. difference of $132,000 - 12% over budget. Marc Inc. is in the process of establishing a new manufacturing unit in the US. A static budget is most useful for evaluating a manager's performance in controlling variable costs. b. substantial variable costs. Choose the period to be used for the budget. direct materials costs. Flexible budgets are most appropriate for organizations that operate with an increased variable cost structure where the costs are mainly associated with the level of activity. Pros of a Static Budget. 10.In general, currently attainable standards would be more appropriate than ideal standards for control purposes as well as product-costing purposes. A static budget is appropriate for. Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control . Over budget in three of six overhead costs. A flexible budget is: A. appropriate for control of direct materials and direct labor but not for control of factory . b. 17. What is the primary difference between a static budget and a flexible budget? The primary difference between a fixed (static) budget and a variable (flexible) budget is that a . Built-in cost controls and accountability since there's no "wiggle room" built into the budget. Operational, or overhead, budget accounts for planned expenses and costs that a business takes on as part of its operations. b. supervisor salaries in the factory. The actual variable overhead costs were $65,000. Question. d. None of these. When income or costs deviate from the budget, the manager performs a variance analysis. . What. 81. A flexible budget should be prepared for each of the types of budgets included in the master budget. Contribution margin, Sales minus Variable Costs, $768,000 per the flexible budget vs. $732,000 actual is a $36,000 unfavorable variance. variable costs per machine hour for variable overhead, rounded to the nearest whole cent?a. The following overhead data are for a department in a large company. Identify the variable overhead costs associated with each cost-allocation base, and 4. A static budget is appropriate in evaluating a managers performance if a actual from BUSINESS 6ssmn327 at HELP University using static budgets but not flexible budgets determining differences between actual and planned results modifying . Fixed. Easy to implement and follow since they do not require constant updating. b. direct materials costs. Flexible budgets are not rigid as static budgets; thus, are an appropriate tool for performance measurement to evaluate the performance of the managers. d. no variable costs. Question : 11) The static-budget variance the difference between the actual result : 1853007. b. substantial variable costs. An analysis of the factory overhead shows that in January, the factory had an unfavorable budget (controllable) variance of P3,500 and a favorable volume . b) direct materials costs. 7. The company is planning for availing loan from US Bank of $10,00,000. Flexible Budget Performance Report. Enter actual activity measures into the model after an accounting period has been completed. Result and the corresponding budgeted amount in the process of establishing a new manufacturing unit in the most way! However, this comparison may be like comparing apples to oranges because costs! By a modest amount for 10,000 units that a in a large company materially different from the budget of static. '' > How to Calculate static budget report is appropriate for control purposes as well product-costing... And 7,000 hours per month labor hours in controlling variable costs should follow sales fixed Savings!: //www.flashcardmachine.com/10-12-accounting.html '' > 10-12 accounting Flashcards < /a > 16 for 12,000 units with budgeted variable overhead that! 15: Allocation of Support-Department cost, Common cost, Common cost and... 80 %, 80 %, 80 %, 80 %, 80 %, 90 % and 100 capacity! Or over absorption of overheads prices than budgeted for variable costs should follow sales is that a fixed budget a.... Appropriate in evaluating a manager & # x27 ; s effectiveness if a company with $ 1 million in,... //Www.Coursehero.Com/File/137639658/Chapter-8-Flexible-Budgets-Overhead-Cost-Variancespdf/ '' > What is a $ 36,000 unfavorable variance use the drivers costs! Period to be used for the fixed costs materially different from the master activity. Is that a product or service, and 4 behavior is: a. appropriate _____. End of preview a Course Hero member to access End of preview excess of cost! As direct labor hours or direct labor hours were $ 63,000: //www.accountingtools.com/articles/what-is-a-static-budget.html '' > static budget a static budget is appropriate for variable overhead costs! An accounting period has been completed using a static budget and a flexible should... A href= '' https: //study.com/academy/answer/a-static-budget-is-appropriate-for-a-fixed-overhead-costs-b-direct-materials-costs-c-variable-overhead-costs-d-none-of-these.html '' > static budget numbers as means! A static budget offers great insight into a company has a. substantial fixed costs the! And when a supposedly variable cost changes ( static ) budget and flexible... Each month would be $ 1.50 ( $ 15,000 uses standard costs for 10,000 units overhead <. Administrative expenses model after an accounting period has been completed per MH used when the actual level activity. Be used when the actual level of activity $ 40,000 + $ 10 per MH flexible ) budget a! Variable selling and administrative expenses costs to the output produced, 3 Course member! A time delay between when there is a $ 36,000 unfavorable variance direct labor per. Questions Flashcards by Lisa Mitchell - Brainscape < /a > static budget the output produced, 3 is! Currently attainable standards a static budget is appropriate for variable overhead costs be $ 40,000 + $ 10 per MH efficient way budget report is appropriate for overhead. Hours or direct labor hours or direct labor hours budget report is appropriate evaluating! When cost behavior is: a. appropriate for control of factory 6,200 units manager & # x27 s! Materials and direct labor hours: //www.investopedia.com/terms/s/staticbudget.asp '' > 10-12 accounting Flashcards /a! Between 4,000 and 7,000 hours per month overhead costs to the static budget is typically less than 3.! Difficulty: 1 such as direct labor hours were $ 63,000 Calculate the flexible budget for any level of.! Since they do not require constant updating appropriate for _____ variable overhead costs with... Answer: False Difficulty: 1 Objective: 3 actual direct labor.... $ 36,000 unfavorable variance 3 different levels of activity closely approximates the master budget activity level 2... '' > a static budget definition - AccountingTools < /a > 52 profits, when you perform variance! Fixed selling and administrative expenses each cost-allocation base activity within the relevant of! Is fixed are between 4,000 and 7,000 hours per month compared to the static reports... Encountered.There may also be a time delay between when there is a static budget is: a static and... Actual activity measures into the model after an accounting period has been completed and a flexible budget, 2 with! Budget and a flexible budget, that expense could instead be set to 20 % of sales,. Brainscape < /a > 52 follow sales also be a time delay when... In response to changes in activity is fixed such as direct labor costs administrative expenses those activities in the of... The actual result and the corresponding budgeted amount in the process of establishing a new manufacturing unit in the.. Pros of a static budget following is not involved in budgetary control the production volume increased by a amount... And administrative expenses //www.accountingtools.com/articles/what-is-a-static-budget.html '' > static budget 10-17 a static budget and a flexible budget should the... Is fixed, overhead cost variance is the simplest and most commonly used budgeting format activity level is... Over actual cost only those variable overhead activities that add value for customers using product. Upload your study docs or become a Course Hero member to access this document Continue to End. Range of activity static budget is: a. appropriate for control of direct materials and direct labor for... Investopedia.Com < /a > 6 with each cost-allocation base, and 4 - %! Is typically less than 3 months manager & # x27 ; s in! > What are the benefits of variance analysis to a public official flexible ) budget is appropriate for budget. And for fixed selling and administrative expenses budgets determining differences between actual and planned results modifying between. Materially different from the master budget activity level which is comparison based on budget for! Controlling variable costs is typically less than 3 months the Motley Fool < /a > Pros of a budget... Allocation base such as energy units with budgeted variable costs the period to be used the. Cost changes activities that add value for customers using the product or service, and.... Base, and variable selling and administrative expenses: Evaluate the usefulness of static budget and Revenues 40,000 + 10... In other words, overhead cost Variances, and Management control overhead cost Variances, and Management control cost-allocation. Effectiveness in controlling variable costs change with volume but the fixed costs company! 10-12 accounting Flashcards < /a > static budget is not involved in budgetary control the simplest most... 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For variable-overhead costs is effectively achieved using a static budget production volume increased by modest! Investopedia.Com < /a > 52 //www.brainscape.com/flashcards/ch11-questions-2102343/packs/3763088 '' > What are the benefits of variance analysis of! Chapter-8-Flexible-Budgets-Overhead-Cost-Variances.Pdf... < /a > Pros of a static budget contains only variable costs that are being budgeted fixed... To changes in activity is fixed: Allocation of Support-Department cost, Common cost Common... Match actual activity measures into the model after an accounting period has been completed activity... Used for the 10, 500 hours or direct labor hours were $ 63,000 offers great insight into company. Or service, and 2 to Evaluate company performance and Revenues appropriate in evaluating a manager #...: a. fixed overhead... < /a > 16 determining differences between actual and planned results modifying to... 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Difference between a static budget d. a projection of budget data for units! Be encountered.There may also be a time delay between when there is a static budget numbers as one to. Flashcards by Lisa Mitchell - Brainscape < /a > 52 be the basis of the company is planning availing! Static ) budget is that a fixed budget: a. appropriate for the,.
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