The activity measure selected for use in a variable overhead flexible budget and a fixed overhead flexible budget:

Question

Quizplus · Accepted Answer

The activity measure selected for use in a variable overhead flexible budget and a fixed overhead flexible budget should be one that varies in a similar behaviour pattern to the way that variable overhead varies. This is because the budgeted overhead costs are based on the expected level of activity, and if the activity measure is not aligned with the variable overhead costs, then the budgeted overhead costs will not be accurate. Therefore, the best choice is to select an activity measure that varies in a similar way to the variable overhead costs.

The Activity Measure Selected for Use in a Variable Overhead