Which one of the following statements is true in developing a flexible budget within a relevant range of activity?
A)The budget must reflect a fixed level of activity.
B)Total variable costs should be adjusted based on the activity index chosen.
C)Costs cannot increase when different levels of activity exist.
D)Fixed costs are not reported.

Question

Quizplus · Accepted Answer

In developing a flexible budget within a relevant range of activity, total variable costs should be adjusted based on the activity index chosen. This means that as the level of activity increases or decreases, the variable costs will also increase or decrease accordingly. Fixed costs, on the other hand, remain constant within the relevant range of activity and should be included in the flexible budget. Option A and C are incorrect as the flexible budget should not reflect a fixed level of activity and costs can increase or decrease as different levels of activity exist. Option D is incorrect as fixed costs should be reported in the flexible budget.

Which One of the Following Statements Is True in Developing