Asked by Jimmiria Porter on Jun 24, 2024
Verified
When a flexible budget is used, a decrease in the actual production level within a range of activity would
A) decrease variable cost per unit.
B) decrease total variable costs.
C) increase variable cost per unit.
D) decrease fixed cost per unit.
Variable Cost
Costs that change in proportion to the level of goods or services production, such as materials and direct labor.
Activity Range
Activity range refers to the span of levels of operational activity that a business can perform within, while maintaining efficiency and effectiveness in its processes or production.
Production Level
The quantity of goods or services produced during a specified time period.
- Acquire knowledge on the relationship between production quantities and their effects on budgeting and cost differences.
Verified Answer
SP
Sunita PangeniJun 27, 2024
Final Answer :
B
Explanation :
With a flexible budget, variable costs should adjust proportionately with the decrease in production level. Therefore, total variable costs should decrease as production level decreases within the relevant range of activity.
Learning Objectives
- Acquire knowledge on the relationship between production quantities and their effects on budgeting and cost differences.