CMA Intermediate · Cost Accounting · Budget and Budgetary Control
In a flexible-budget-based production cost budget, which item stays constant in total when production rises within the relevant range?
Fixed production overhead stays constant in total as production rises within the relevant range. Direct material, piece-rate wages and variable overhead vary with output, whereas fixed overhead per unit falls because the same total is spread over more units.
- ADirect material cost
- BPiece-rate direct wages
- CVariable overhead
- DFixed production overheadCorrect
Explanation
Fixed production overhead remains constant in total within the relevant range, while its per-unit amount falls as output rises. Direct material, piece-rate wages and variable overhead all change in total with output.
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