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Budgeting and variance analysis both sit under which broad category of managerial accounting work?
AAccumulating product costs
BAnalyzing cost behavior
CComparing cost alternatives
DEvaluating performance
Answer & Solution
Correct answer: D. Evaluating performance
1. Managerial accounting topics fall into four categories: accumulating costs, analyzing costs, evaluating performance and comparing alternatives.
2. Budgeting looks into the future and estimates what sales, costs, production and cash flows will be.
3. Variance analysis is a controlling method that compares expected outcomes to actual results and measures progress against goals.
4. Planning ahead and then checking progress against the plan are both acts of evaluating performance.
5. Accumulating costs covers job order, process and activity-based costing, so it is the wrong home for budgeting.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 1.1 Introduction_
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