Variable costs will be higher than projected in the static budget due to the volume variance are the assumptions that could be made under a flexible budget process. The correct answer is option(d).
This method, known as "flexible budgeting," has been used to assess the cost behavior of all operating costs, set budget levels for various degrees of activity, and track activity based on relative cost rather than just the quantity of tests run.
A flexible budget is one that is based on various sales volumes. For each projected level of production, the static budget is adjusted by a flexible budget. Due to this flexibility, management is able to predict how the budgeted figures will change as sales volume changes.
Key Characteristics of Flexible Budget:
The complete question is:
If a static budget forecasted 100,000 units to be sold in the fiscal year, and actual units sold amounted to 120,000, which assumption could be made under a flexible budget process?
- Because the actual volume exceeds the budgeted volume, there is an unfavorable volume variance for output.
- Fixed costs would increase in the flexible budget due to the volume change.
- The effectiveness of the manager is in question.
- Variable costs will be higher than projected in the static budget due to the volume variance
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