Variances for variable costs will be misleading when the planned output differs from budgeted output.A solution to this problem would be
A) calling all costs fixed.
B) to use flexible budgeting.
C) better prediction of output.
D) to eliminate the budgeting process.

Question

Quizplus · Accepted Answer

When the planned output differs from the budgeted output, using a flexible budgeting approach can account for the changes and provide more accurate variances for variable costs. This approach adjusts the budgeted amounts for variable costs based on the actual level of output achieved, allowing for a better comparison of actual costs to expected costs. Calling all costs fixed or eliminating the budgeting process altogether would not address the issue of inaccurate variances for variable costs. Better prediction of output is important but may not always be possible or feasible, especially in uncertain or dynamic environments. Therefore, using a flexible budgeting approach is the best choice in this scenario.

Variances for Variable Costs Will Be Misleading When the Planned