When a flexible budget is used, a decrease in the activity level would
A)increase total fixed costs.
B)increase variable cost per unit.
C)decrease variable cost per unit.
D)decrease total costs.

Question

Quizplus · Accepted Answer

When a flexible budget is used, the cost per unit is assumed to remain constant within a certain range of activity levels. Therefore, a decrease in the activity level would result in lower total variable costs, as less resources are used, and fixed costs would remain unchanged. As a result, total costs would decrease.

When a Flexible Budget Is Used, a Decrease in the Activity