The activity measure selected for use in a variable- and fixed-overhead flexible budget:
A)should be stated in sales dollars.
B)should be approved by the company's president.
C)should vary in a similar behavior pattern to the way that variable overhead varies.
D)should remain fixeD.
E)should produce the most attractive results for the individual who will use the budget in managerial applications.

Question

Quizplus · Accepted Answer

The activity measure selected for use in a flexible budget should vary in a similar behavior pattern to the way that variable overhead varies. This ensures that the budget reflects realistic costs based on actual activity levels. Therefore, option C is the best choice. Option A is incorrect, as sales dollars are not a suitable activity measure for variable and fixed overhead costs. Option B is irrelevant, as the president's approval is not necessary for selecting an activity measure for a flexible budget. Option D is incorrect because a fixed activity measure will not capture the cost changes caused by varying activity levels. Option E is incorrect as the priority should be on selecting an appropriate activity measure, not on producing attractive results for the budget user.

The Activity Measure Selected for Use in a Variable- and Fixed-Overhead