When a Flexible Budget Is Used in Performance Evaluation,actual Costs

question 132

True/False

When a flexible budget is used in performance evaluation,actual costs are compared to what the costs should have been for the actual level of activity during the period rather than to the static planning budget.

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Definitions:

Differential Cost

The disparity in expenses resulting from choosing between two options or changes in the amount of output.

Manufacturing Operations

All processes involved in converting raw materials into finished goods, including assembly, labor, and use of machinery.

Unused Capacity

Refers to the available production or service facility space that is not currently being used to generate revenue or produce goods.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not influence future business decisions.