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Asked by Laura-Leigh Holley on May 14, 2024

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In a flexible budget, when the activity declines, the total variable cost also declines.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more relevant comparison of actual to budgeted performance.

Total Variable Cost

The sum of all variable costs (costs that change with production volume) involved in producing a specific level of output.

Activity Declines

A reduction in the level of operations, production, or business activities.

  • Identify the distinctions between fixed and variable costs in relation to budget formulation and analysis of variances.
  • Analyze the implications of actual activity frequencies on planned expenses and revenues.
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saurabh rathaurMay 20, 2024
Final Answer :
True
Explanation :
In a flexible budget, total variable costs are based on the level of activity. As activity declines, total variable costs also decline in proportion to the decrease in activity. This is because variable costs are typically tied to the volume of goods or services produced, so as production decreases, variable costs decrease as well.

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