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

question 40

Multiple Choice

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.

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Definitions:

Realized Gains

Profits earned from the sale of an asset, which exceed the asset's purchase price, recognized in the company's financial statements.

Fair Value

Fair value is the estimated price at which an asset or liability could be traded in a fair transaction between willing parties, other than in a forced or liquidation sale.

Bond Investments

Purchasing debt securities issued by corporations or governments, where the investor lends money in exchange for interest payments and the return of the bond's face value at maturity.