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In a flexible budget, when the activity declines, the total variable cost also declines.
Flexible Budget
An adjustable budget that changes or scales according to the level of activity or output, making it more useful for performance evaluation.
Total Variable Cost
The total of all costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.
Activity Declines
Situations where the level of activity or productivity in a business decreases over a certain period.
- Apprehend the crucial nature of activity levels in cost governance and the establishment of adjustable budgets.
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Learning Objectives
- Apprehend the crucial nature of activity levels in cost governance and the establishment of adjustable budgets.
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