The cost-volume relationship used to prepare the flexible budget for this department includes:
A) Manufacturing overhead cost of $1.00 per unit.
B) Fixed cost of $0.65 per unit.
C) Total cost of $1.90 per unit.
D) Variable costs of $1.32 per unit.

Question

Quizplus · Accepted Answer

The flexible budget is based on the relationship between the cost and volume of production. This clearly indicates that the cost is dependent on the volume of production. Option D is the only choice that represents a variable cost per unit, which means it will change with the change in production volume. Therefore, option D is the correct choice. Options A, B, and C are either fixed costs or total costs, which cannot be used to prepare a flexible budget.

The Cost-Volume Relationship Used to Prepare the Flexible Budget for This