Question

  A flexible budget takes into account -------------

       a)Fixed cost only   b)Variable cost only   c)Semi variable cost only   d)Fixed, variable and semi variable cost

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Answer 1

Answer:

a)Fixed cost only

Flexible budgets take into account how changes in production affect costs. So if production goes up, costs with go up. In converse, if we were to sell fewer shoes, our costs would go down!

Explanation:

To compute the value of the flexible budget, multiply the variable cost per unit by the actual production volume. Here, the figure indicates that the variable costs of producing 125,000 should total $162,500 (125,000 units x $1.30).