ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting
Which of the following costs would normally remain unchanged when a budget is flexed from 4,000 units to 5,000 units within the relevant range?
Factory rent would remain unchanged because it is a fixed cost within the relevant range. Direct materials, unit-based commission and piecework labour all vary directly with activity, so each would rise when the budget is flexed from 4,000 to 5,000 units.
- ADirect materials
- BSales commission paid per unit sold
- CFactory rentCorrect
- DPiecework direct labour
Explanation
Factory rent is a fixed cost within the relevant range, so it stays the same when the budget is flexed. Direct materials, per-unit sales commission and piecework labour all vary with activity and would increase by 25% in the flexed budget.
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