If the actual level of activity differs from what was planned,it would be misleading to compare actual costs to the static,unchanged planning budget.

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Quizplus · Accepted Answer

This is because the planning budget was based on a certain level of activity and if the actual level changes, the costs will also change accordingly. Therefore, comparing actual costs to the static planning budget would not give an accurate picture of the actual performance of the business.

If the Actual Level of Activity Differs from What Was