ACCA Applied Knowledge · Management Accounting · Flexible budgets
A budget is flexed from 5,000 to 6,000 units. Which statement about the flexed budget is correct?
Total fixed costs remain unchanged within the relevant range when a budget is flexed. Variable costs change in proportion to activity, with a constant cost per unit, while fixed cost per unit falls as output rises because the same total is spread over more units.
- AFixed cost per unit remains unchanged
- BTotal fixed costs remain unchanged within the relevant rangeCorrect
- CVariable cost per unit falls because output has risen
- DTotal variable costs remain unchanged
Explanation
Within the relevant range, total fixed costs stay constant while total variable costs change in proportion to activity. Fixed cost per unit falls as output rises, and variable cost per unit stays constant.
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