Chapter 9, Problem 1Q

What is a static planning budget?

To determine

Static Budget: The budget that remains same throughout the period irrespective of the change in actual activity level is known as Static budget.

The static planning budget.

Answer to Problem 1Q

Solution: The budget which is prepared based on the budgeted sales volume and does not change as the volume changes due to actual behavior of sales called a static planning budget. A static budget is fixed in nature which is prepared based on the estimation and remains the same even if the real activity increases or decreases.

Explanation of Solution

In simple words, it is an estimation of incomes and expenses regarding future course of business activities. Static budget is prepared based on historical operational data and objectives of the business operation. It is prepared with the motives of planning the sales operations and guiding the flow of the business.

Given: What is a static planning budget?

Conclusion

Static budget is the planned operation which is prepared at one level of activity and remains the same even if actual results are greater or smaller than the planned. It is used as an evaluation measure to determine the difference between the budgeted sales volume and actual sale result of the company.