How is a budget variance calculated with an activity flexible budget?
A)It is based on a flexible budget using cost for actual units produced.
B)It is based on a flexible budget using various activity drivers for actual units produced.
C)It is based on a flexible budget using flexible manufacturing.
D)It is based on a flexible budget using committed resources for actual units produced.

Question

Quizplus · Accepted Answer

A budget variance is calculated by comparing actual results to the budgeted amounts. When using an activity flexible budget, the budgeted amounts are based on various activity drivers (such as direct labor hours or machine hours) rather than a fixed unit cost. Therefore, the best way to calculate the budget variance is to compare the actual results to the flexible budget amounts based on the actual activity levels. Choice A, C, and D do not accurately describe how to calculate a budget variance using an activity flexible budget.

How Is a Budget Variance Calculated with an Activity Flexible