When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.Multiple choice question.in total; per unitin total; in totalper unit; per unitper unit; in total
Question
When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.Multiple choice question.in total; per unitin total; in totalper unit; per unitper unit; in total
Solution
The correct answer is: per unit; in total.
Here's why:
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Variable costs: These are costs that change in proportion to the goods or services that a business produces. In other words, they increase or decrease depending on the company's activity volume. Therefore, when preparing a flexible budget, variable costs are expressed as a constant amount per unit.
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Fixed costs: These are costs that do not change with the level of output. They are expenses that have to be paid by a company, independent of any specific business activities. Therefore, fixed costs are expressed as a constant total amount in a flexible budget.
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