aurie Inc.'s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show
a.direct materials of $60,000, direct labor of $52,800, fixed utilities of $6,000, and supervisor salaries of $25,000
b.direct materials of $72,000, direct labor of $52,800, fixed utilities of $5,000, and supervisor salaries of $25,000
c.the same cost structure in total
d.total variable costs of $159,800
A disadvantage of static budgets is that they?
a. do not show possible changes in underlying activity levels
b. are dependent on previous year's actual results
c. show the expected results of a responsibility center for several levels of activity
d. cannot be used by service companies

A static budget forecasts revenue and expenses over a specific time period but remains constant even as business activity changes. Non-profit, educational, and government organizations frequently use static budgets. A static budget model is most useful when a company's sales and expenses are highly predictable and are not expected to change significantly over the budgeting period as in a monopoly situation.

Budgets are critical in assisting businesses in tracking their finances, understanding their expenses, and identifying ways to maximize profit. A static budget is one that remains constant even as other factors such as revenue and sales volume change.

The static budget is based on the expected output level and revenue of the firm at the start of the accounting period that it is intended to cover. For example, if a company earned $5 million in revenue in the previous year, the company may create a static budget based on that figure.

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