Question: 1. Why is it difficult to interpret a difference between how much expense was budgeted and how much was actually spent? 2. What does a

1. Why is it difficult to interpret a difference between how much expense was budgeted and how much was actually spent?

2. What does a flexible budget performance report do that a simple comparison of budgeted to actual results does not do?

3. How does a flexible budget based on two cost drivers differ from a flexible budget based on a single cost driver?

4. What assumption is implicitly made about cost behavior when all of the items in a static planning budget are adjusted in proportion to a change in activity? Why is this assumption questionable?

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