Which statement is true about the activity index used in preparing the flexible budget?
A)It applies only to fixed manufacturing costs.
B)It is the same for all departments of the company.
C)It significantly influences the variable costs that are being budgeted.
D)It is irrelevant to total costs.

Question

Quizplus · Accepted Answer

The activity index is used to determine the level of activity or production in a given period, and this significantly influences the variable costs that are being budgeted. Therefore, option C is the correct answer. Option A is incorrect as the activity index applies to both fixed and variable costs. Option B is incorrect as the activity index may differ for different departments based on their level of activity. Option D is incorrect as the activity index is relevant to determining total costs.

Which Statement Is True About the Activity Index Used in Preparing