Question

30. High fixed costs will result in a larger variation in operating income than a low fixed cost structure.

True False

31. Bottoms up budgets are the same as self-imposed budgets.

True False

32. Today is November 1, 2018. A continuous budget for the period from November 1, 2018 through

October 31, 2019 is more reflective of current operating conditions than an operating budget for calendar 2018

that was compiled in November 2017.

True False

33. A big advantage of dollar cost averaging is that your average cost basis is reduced over time.

True False

Answer 1

The correct answers should be:

30. FALSE

Reason - since fixed costs remain constant and are high, the deviation in operating income will be much lower that if the fixed cost structure is low

31. TRUE

While preparing Bottoms up budgets, the departments decide their own costs and revenue targets which are then communicated to higher departments under which these small departments roll up

32. TRUE

Rolling or continuous budgets provide a more correct picture of current operating conditions

33. FALSE

While dollar cost averaging enables in levelling of high and low costs it does not necessarily help in reducing average cost basis over time.

Please comment in case of any issue and I will be happy to help.