ACCA Applied Knowledge · Management Accounting · Flexible budgets
Which cost would remain unchanged in total when a fixed budget is flexed from 4,000 units to 4,800 units, assuming the new level is within the relevant range?
Straight-line depreciation of factory equipment stays the same in total because it is a fixed cost within the relevant range. Direct materials, sales commission and piece-rate labour all vary with activity, so they would increase when the budget is flexed to 4,800 units.
- ADirect materials
- BStraight-line depreciation of factory equipmentCorrect
- CSales commission paid at 5% of revenue
- DPiece-rate direct labour
Explanation
Straight-line depreciation is a fixed cost, so its total does not change with activity within the relevant range. Direct materials, commission and piece-rate labour all vary with output or sales and would be flexed upward.
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