In flexible budgets, costs that remain the same in total regardless of the level of activity are:
A budgeted variable costs
B budgeted allocated costs
C budgeted fixed costs
D budgeted shared costs
The correct answer and explanation is:
The correct answer is C. budgeted fixed costs.
In flexible budgets, costs that remain the same in total regardless of the level of activity are considered fixed costs. These costs do not change with the volume of goods or services produced, or the level of activity within the business. They are incurred even if there is no production or sales activity. Examples of fixed costs include rent, salaries of permanent staff, and insurance premiums.
A flexible budget is a financial tool that adjusts for different levels of activity. It allows companies to compare actual performance with expected performance based on the actual level of activity, rather than the original forecast. Fixed costs are unaffected by changes in activity levels, so they remain constant within the flexible budget.
Budgeted variable costs, on the other hand, change with the level of activity. These costs include direct materials, direct labor, and other expenses that increase or decrease based on the volume of production.
Budgeted allocated costs refer to costs that are allocated to different departments or activities within an organization based on certain criteria, and these may change depending on the allocation method used.
Budgeted shared costs often involve expenses that are shared across different departments or units, such as utilities, and while they may fluctuate based on usage or activity levels, they are not necessarily fixed in total.
In summary, budgeted fixed costs are the costs that do not change with the level of activity, and they are crucial for understanding how a business will perform financially under varying circumstances.