When should a company use an activity-based flexible budget with multiple cost drivers instead of a simple flexible budget with one cost driver?
A)when a significant portion of costs vary with only one cost driver
B)when a significant portion of costs vary with the number of units of output
C)when a significant portion of costs vary with the number of units of sales
D)when a significant portion of costs vary with several different cost drivers

Question

Quizplus · Accepted Answer

An activity-based flexible budget with multiple cost drivers is more appropriate when a significant portion of costs varies with several different cost drivers. This allows for a more accurate and detailed budgeting process that takes into account the various factors that impact costs. A simple flexible budget with one cost driver is more appropriate when the majority of costs vary with only one cost driver.

When Should a Company Use an Activity-Based Flexible Budget with Multiple