If the master budget prepared at a volume level of 10,000 units includes direct labor of $10,000, a flexible budget based on a volume of 9,000 units would include direct labor of $9,000.

Question

Quizplus · Accepted Answer

This statement is true because direct labor is a variable cost that is directly affected by changes in volume. Therefore, if the volume decreases to 9,000 units from the planned 10,000 units, the flexible budget would reflect a decrease in direct labor costs to $9,000.

If the Master Budget Prepared at a Volume Level of 10,000