In an Activity Flexible Budget, the Variable Cost Component Typically

question 118

Multiple Choice

In an activity flexible budget, the variable cost component typically corresponds to

• A) those resources that vary with direct labor hours.
• B) resources acquired as needed.
• C) resources acquired in advance of usage.
• D) resources that do not change as the activity output changes.
• E) None of these.

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Definitions:

Indirect Material

Items used in the production process that do not become a part of the final product, such as lubricants for machines.

Direct Materials

Raw materials that are directly traceable to the production of a specific product and are a significant component of manufacturing expenses.

Nonmanufacturing Cost

Expenses that are not directly associated with the production of goods, including selling, general, and administrative expenses.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period they are incurred.