[ACTG 2020] - Final Exam Guide - Comprehensive Notes for the exam (43 pages long!)

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29 Nov 2016
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Chap 11 flexible budgets and overhead analysis. A performance report compares actual costs with budgeted costs: compare actual costs with the budgeted costs for the budgeted level of activity, compare actual costs with the actual level of activity. The first choice^ requires a report on static budgets, the second requires a reposed based on flexible budgets. Prepared in advance based on a particular level of activity and is not adjusted or altered regardless of any subsequent changes in actual output, revenues, or costs. Fundamentally, this does not make sense because two different activity levels are being compared. A meaningful report would compare the same activity levels. A flexible budget enables a firm to compute the expected costs per unit and then estimate costs for a range of activity levels or production volumes. Two types of flexible budgets: before the fact. Gives expected outcomes for a range of activity levels or production volumes.

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