Question

In: Accounting

What makes flexible budgeting necessary? A. Variable costs change with the level of activity. B. Fixed...

What makes flexible budgeting necessary?

A.

Variable costs change with the level of activity.
B.

Fixed costs do not change with the level of activity.
C.

Employees are basically dishonest.
D.

Costs are fixed for the most part.

Solutions

Expert Solution

The variable costs per unit remains constant but it changes with the level of activity. To flex the activity, flexible budget is prepared, where the variable cost per unit is directly multiplied with the level of activity. The fixed cost remains the same under all levels of activity.

Option A, Variable costs change with the level of activity is the correct option, because of the nature of variable cost, Flexible budget is required to be made.

Option B, Fixed costs do not change with the level of activity is the incorrect option, as when there is no change of costs with the level of activity, flexible budget is not required.

Option C, Employees are basically dishonest is incorrect option, as there is no relation of employees with the flexible budget necessity.

Option D, Costs are fixed for the most part is incorrect option, as nature of variable cost makes flexible budget necessary.

Comment below for any query

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or...
Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or mixed. Identify the activity and the associated activity driver that allow you to define the cost behavior. For example, assume that the resource input is “cloth in a shirt." The activity would be "sewing shirts," the cost behavior "variable," and the activity driver "units produced." Prepare your answers in the following format: Activity Cost Behavior Activity Driver a. Flu vaccine Assembling Delivering orders Filing...
Exercise 3.9 Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable,...
Exercise 3.9 Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or mixed. Identify the activity and the associated activity driver that allow you to define the cost behavior. For example, assume that the resource input is “cloth in a shirt." The activity would be "sewing shirts," the cost behavior "variable," and the activity driver "units produced." Prepare your answers in the following format: Activity Cost Behavior Activity Driver a. Flu vaccine b. Salaries,...
What is the difference between fixed costs and variable costs?’ Are there fixed costs in the...
What is the difference between fixed costs and variable costs?’ Are there fixed costs in the long run? Explain briefly. Are fixed costs also sunk costs? Explain. What are diminishing marginal returns as they relate to costs? Which costs are measured on a per-unit basis: fixed costs, average cost, the average variable cost, variable costs, and marginal cost? How is each of the following calculated: marginal cost, average total cost, average variable cost? What shapes would you generally expect each...
Why might variable costs be considered less risky than fixed costs? (Fixed costs don’t change in...
Why might variable costs be considered less risky than fixed costs? (Fixed costs don’t change in relation to sales, so they still have to be paid, even if there is no income.) What happens if you don’t sell any cookies one month or sell only a hundred? The riskiness of fixed costs demonstrates why it’s a good idea for entrepreneurs to have a cash reserve in the bank equal to three months of fixed costs.
Activity-Based Flexible Budgeting Foy Company has a welding activity and wants to develop a flexible budget...
Activity-Based Flexible Budgeting Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity: • Four welding units, with a lease cost of $15,000 per year per unit • Six welding employees each paid a salary of $60,000 per year (A total of 9,000 welding hours are supplied by the six workers.) • Welding supplies: $300 per job • Welding hours: 3 hours used per job...
Costs that do not change with production level are known as fixed costs Question 1 options:...
Costs that do not change with production level are known as fixed costs Question 1 options: True False Question 2 (1 point) Payback analysis utilizes a significantly different approach to alternative evaluation than the primary methods of PW, AW, ROR, and B/C. It is possible for payback analysis to select a different alternative than these techniques.   Question 2 options: True False Question 3 (1 point) Examples of fixed costs are direct labor, materials, and warranty. Question 3 options: True False...
Activity Flexible Budgeting, Performance Report, Volume Variance Novo, Inc., wants to develop an activity flexible budget...
Activity Flexible Budgeting, Performance Report, Volume Variance Novo, Inc., wants to develop an activity flexible budget for the activity of moving materials. Novo uses eight forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $18,000 per year per forklift. Novo employs 25 forklift operators who receive an average salary of $50,000 per year, including benefits. Each move...
Activity Flexible Budgeting, Performance Report, Volume Variance Novo, Inc., wants to develop an activity flexible budget...
Activity Flexible Budgeting, Performance Report, Volume Variance Novo, Inc., wants to develop an activity flexible budget for the activity of moving materials. Novo uses eight forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $18,000 per year per forklift. Novo employs 25 forklift operators who receive an average salary of $50,000 per year, including benefits. Each move...
Which of the following costs does not change in total when the activity level increases or...
Which of the following costs does not change in total when the activity level increases or decreases within the relevant range? mixed costs fixed cost variable costs relevant costs None of the answer choices is correct.
XYZ Company makes 250 widgets. The variable costs are $36.80 per unit and fixed costs are...
XYZ Company makes 250 widgets. The variable costs are $36.80 per unit and fixed costs are $31.20 per unit; however, $22.60 in fixed costs per unit is unavoidable. What is the effect on net income if the company instead buys the widgets from an outside supplier for $47.00 per unit? Decrease of $5,250 Increase of $400 Decrease of $400 Increase of $5,250
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT