When Using a Flexible Budget, What Will Happen to Variable

question 129

Multiple Choice

When using a flexible budget, what will happen to variable costs on a per-unit basis as production increases within the relevant range?

• A) Decrease
• B) Increase
• C) Remain unchanged
• D) Fixed costs are not considered in flexible budgeting

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Definitions:

Variable Overhead

Costs of production that fluctuate with the level of output, such as utility expenses and some types of labor costs, which are not directly tied to the volume of production.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular cost or expense category.

Standard Cost

A predetermined cost of manufacturing or producing a product or performing a service under normal conditions.

Budget Variance

The difference between the budgeted or projected financial performance and the actual performance.