Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets.

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Actual costs are the costs incurred, as recorded in the accounting system, and are not determined by plugging the actual level of activity into the cost formulas used in flexible budgets. Flexible budgets adjust budgeted costs based on the actual level of activity, but actual costs are based on real transactions and expenses that occurred.

Actual Costs Are Determined by Plugging the Actual Level of Activity