If a company falls short of the level of sales volume specified in a static budget, then the variable manufacturing cost will be adjusted upward in the flexible budget.

Question

Quizplus · Accepted Answer

In a flexible budget, variable costs adjust based on the actual level of output or sales volume, not the other way around. If sales volume is lower, variable manufacturing costs would typically be adjusted downward to reflect the lower level of production or sales, not upward.

If a Company Falls Short of the Level of Sales