Variances for Variable Costs Will Be Misleading When the Planned

question 3

Multiple Choice

Variances for variable costs will be misleading when the planned output differs from budgeted output.A solution to this problem would be

• A)to use a stricter budgeting process.
• B)to use flexible budgeting.
• C)to better predict the final output.
• D)to allow more judgement involve in the budgeting process.

---

Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.

Sales Mix

The relative proportion of different products or services sold by a company, significantly influencing its overall profitability.

Existing Sales

The volume or amount of sales that a company has already achieved within a specific period, prior to any new sales efforts or campaigns.