In the following questions, there are two statements. One is labelled as Assertion (A) and other is labelled as Reason (R):

Assertion (A): Fixed budget is concerned with budgeting of fixed assets.

Reason (R): Cost centre and responsibility centre are not homogeneous terms.

Solution

Assertion: A fixed budget is a budget that does not change, regardless of the level of activity. It is based on a single level of output, and the budgeted amounts are not adjusted for changes in activity. Fixed budgets are typically used for budgeting fixed costs, such as rent, salaries, and depreciation. Reason: A cost center is a responsibility center that only focuses on costs. The manager of a cost center is responsible for controlling the costs of the center, but they do not have any control over the revenues of the center. A responsibility center is a unit of an organization that is headed by a manager who is responsible for the performance of that unit. Responsibility centers can be classified into cost centers, revenue centers, profit centers, and investment centers.