The activity measure selected for use in a variable- and ﬁxed-overhead ﬂexible budget:
A)should be stated in sales dollars.
B)should be approved by the company's president.
C)should vary in a similar behavior pattern to the way that variable overhead varies.
D)should remain ﬁxed.
E)should produce the most attractive results for the individual who will use the budget in managerial

Question

Quizplus · Accepted Answer

The activity measure selected for use in a flexible budget should vary in a similar behavior pattern to the way that variable overhead varies, as this will enable accurate and relevant budgeting for both variable and fixed overhead costs. It is not necessary for the activity measure to be stated in sales dollars, approved by the president, or produce attractive results for the individual using the budget. The activity measure should not remain fixed, as this would not enable accurate budgeting for variable overhead costs.

The Activity Measure Selected for Use in a Variable- and ﬁXed-Overhead