Asked by Flora Gbogi Emmanuel on May 05, 2024
Verified
Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.
Flexible Budget
A dynamic budget that changes according to the business activity levels, offering a more adaptable financial planning tool.
Level of Activity
A measure of the volume of production or operations, often influencing cost behavior and used to allocate fixed costs to units of product.
- Discern between fixed costs and variable expenditures during budget development and variance evaluation.
Verified Answer
JG
JOHANNA GONZALEZ GARCIAMay 09, 2024
Final Answer :
False
Explanation :
Fixed costs should still be included in a flexible budget as it helps to determine the break-even point and the impact of changes in activity levels on the overall budget. However, they will not change in response to changes in activity levels.
Learning Objectives
- Discern between fixed costs and variable expenditures during budget development and variance evaluation.
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