For performance evaluation,the amount of costs actually incurred should be compared to the costs that would have been incurred at the actual volume of activity rather than at the planned volume of activity.

Question

Quizplus · Accepted Answer

Comparing actual costs to planned costs can be misleading if the actual volume of activity differs from the planned volume. To obtain an accurate evaluation of performance, it is necessary to compare actual costs to the costs that would have been incurred at the actual volume of activity. This is because costs are expected to vary with changes in volume, and comparing actual costs to planned costs assumes that the volume remains constant.

For Performance Evaluation,the Amount of Costs Actually Incurred Should Be