Activity-based budgeting classifies costs as variable or fixed with respect to the activity output measure.

Question

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Activity-based budgeting takes into account the level of activity or output to classify costs as variable or fixed. Costs that vary with changes in activity are considered variable, while those that remain constant regardless of activity are considered fixed. This allows for a more accurate budgeting approach based on the specific activities and outputs of the organization.

Activity-Based Budgeting Classifies Costs as Variable or Fixed with Respect